'Inner Circle' research survey on Fed QE

There is only one topic of discussion, I am not going to try and predict what happens in the minutes and hours post tonight's FOMC meeting. However I have received a good piece put together by a leading research house, it is a survey of some leading players (Inner Circle) in the treasury market and what they think may happen tonight in regard to the Fed's action and likely reaction.

** *The Survey ***

1.Q- How much do you thing the Fed will ultimately buy....?

A- The average came to $862 bn, with several respondents indicating a bias to more if conditions warranted.

2. Q-How long will they buy for....?

A-The consensus says for the next 10 months.  The devil is in the details with the focus on the next six months, about $100 bn per month, and then tapering off in H2 of 2011.

3.Q- Will the FOMC offer a degree of shock and awe, i.e. $100 bn for each month for the next several months and then review, or something more open?

A-The answers were interesting.  On the one hand, overwhelmingly people felt the statement would offer a high degree of flexibility and therefore be somewhat vague and open-ended.  This could prove a bit
disappointing and the point was made to us.  On the other hand there were several who felt the lack of shock and awe in terms of size could or would be offset by the Fed changing the language about 'extended
period' by  extending it even further or perhaps put explicit focus on a sector, i.e. the belly.

4. Q-With 10s at 2.61+%, how much is priced in (name a figure)?

A-This was tough as we got percentages, basis points, and dollar amounts.  Dollar amounts got the most responses and so with that we offer that this survey says $400 bn in priced in.

5.Q- If they buy 500 bn, how much lower can 10-yr rates go?  1 trillion?

A-The consensus came to 2.35% for $500 bn and 2.10% for $1 trillion.

6. Q-How will you position going into the meeting?

A-54% or those who responded (a majority) said long and/or in a flattener.  35% said flat.  And 11% said short or in a steepener.

7. Q-What are you expecting to do coming out of the meeting?

A-31% of the respondents said 'Wait' or 'Watch' with some saying they'd follow the action.  21% said they would buy with 18% apparently thinking the same way only they said they would buy pullbacks.  26% said they planned to sell strength.