QT-1 blew up the repo market. This time around, the Fed wants to avoid that type of debacle so it wouldn’t have to “prematurely” end QT-2.
Four decades of history say it’s not over until the 2-year yield overshoots the EFFR. It has undershot for a year, and inflation is taking off again.
The Fed shed 33% of the Treasury securities it had added during pandemic QE and 24% of the MBS.
It’s premature to think rate cuts are right around the corner, we haven’t decided anything yet, it’s meeting by meeting, but in March no way Jose, I mean, that’s not my base case.
Ok, so that push-back in the statement was unexpected.
This is funny, in a central-bank kind of way.
RRPs heading to their normal level of zero. And it’s time to talk about the revived Standing Repo Facility.
On top of whatever unrealized losses ($1.3 trillion in Q3) from its securities holdings. But losses don’t matter to the Fed.
Last remaining bailout tool from the March bank panic goes away. Current arbitrage may have been a factor in shutting down this baby.
The Fed has shed 31% of the Treasury securities it had added during pandemic QE.