This creates an excess supply of securities, driving up the interest rate.
Many have rushed to buy ultra-safe United States Treasury securities, driving the yields on those investments to historic lows.
The central bank also has amassed a portfolio of $2.9 trillion in Treasuries and mortgage-backed securities, driving down long-term interest rates by accepting low rates, and pushing investors into stocks and other riskier assets.
As stocks declined, investors once again rushed for safety in government debt like United States Treasury securities, driving benchmark market interest rates to their lowest levels in more than a year.
For years, the Fed kept buying and buying these securities, driving up their price — high demand, low supply — and driving down the cost of money, since bond prices trade in inverse proportion to their yield.
Mr. Greenspan, who led the Fed for 18 years until he retired in 2006, warns that without drastic action to increase federal revenue and reduce the long-term growth in health care costs, bond investors could make a run on Treasury securities, driving up the nation's borrowing costs and leading to another global economic crisis.
In the bond market last week, safety-seeking investors bid up the prices of Treasury securities, driving down yields to extraordinarily low levels along a broad range of maturities — and extending the astonishing rally of long-term Treasury bonds, which continue to outperform the stock market and nearly every other asset class.
Scratch an economist today, and all he'll talk about is the need for QE (quantitative easing) whereby the Fed buys a trillion or two of Treasuries and mortgage-backed securities, driving down long-term interest rates.
Yet global bond markets laughed off inflation jitters: Many investors again snapped up fixed-income securities, driving down yields.
That way, a security patrol driving past might not notice, in the darkness, that Y-12's security had been compromised.
