Volt, it's also possible that their bond will initially rally in...

Volt, it's also possible that their bond will initially rally in price (fall in rates) as a reflection of deflation, provided the fed doesn't start printing money like mad. I read somewhere excess real money means inflation whereas insufficient real money equals deflation. At the moment the Fed is purchasing large junks of securities thus giving the holders of those securities large sums of money. Although I don't full understand it apparently this is not the same as turning on the printing presses and flooding the system with real money. There's a subtle distinction. In reality I believe it's a combination but more on the side of the Fed "lending" out money in return for securities with the expectation of being paid back with interest by some future date. If the deflationary scenario pans out the bonds should rally in price before collapsing once people realise these "loans" can't be paid back, and the Fed itself faces a risk of defaulting as well as the US government.