Fed Dead Redemption II: Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff

First, the expectations for furthering tighening of The Fed Funds Target Rate are near zero, at least according to WIRP.

wirp012519.png

Now, according to Nick Timiraos at the Wall Street Journal, Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight.

shrink

The Fed indeed may slow the unwind of its balance sheet which is primarily allowing Treasury Notes and Treasury Bonds to mature. Agency MBS are expected to mature at later dates.

fedholdings012519

So, The Fed may, at their next meeting, adjust their redemption schedule.

qt calendar nomura jan 19 2019

And alter their redemption caps.

fed redemptions max

Clearly, The Fed is trying to keep interest rates from rising too quickly. Good luck with that! It could be that The Fed has run out of ammo.

Case in point? Recent Fed Balance sheet reductions correspond to LOWER 10-year Tteasury yields and 30-year mortgage rates.

fedratge.png

Here is The Fed’ image of itself and “the savior” Ben Bernanke. But here is the reality.

feddead.jpg

 

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