Here we have the Treasury selling billions in bond debt & the Fed buying billions in bond debt. This sounds like “left pocket”/”right pocket” accounting. Isn’t Bernie Madoff in the pokey for the same thing?

The Treasury Department will offer $26 billion worth of 7-year notes in the last of three auctions this week. On Tuesday, the government sold $35 billion worth of 5-year notes after a $40 billion sale of 2-year notes Monday.

At 9 a.m. ET, the Treasury will make its quarterly refunding announcement. Analysts at MF Global expect the government to issue plans to offer $70 billion to $76 billion in 3-,10- and 30-year debt.

While demand for U.S. debt assets has remained relatively strong, with Tuesday’s auction of 5-year notes receiving a 2.22 bid-to-cover ratio, many analysts worry that supply will eventually weigh on prices.

Later Wednesday afternoon, the Federal Reserve will conclude its two-day policy meeting. The central bank is expected to hold interest rates steady at historic levels near zero.

But the bond market will pay close attention to the Fed’s policy statement for clues the central bank may expand its campaign to buy $300 billion in government debt.

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