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Federal Reserve Balance Sheet Strategy



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Federal Reserve Building (credit photo: Getty) t

Getty

The Federal Reserve reduced its balance sheet by $ 27 billion in the week ending 15 May and continued its “quantitative tightening” strategy.

The minutes of the May 1 FOMC meeting show that the Federal Reserve will be patient with its interest rate policy. My call for 2019 remains the same: the Fed has no reasons for raising or lowering the federal funds rate, but the Fed balance sheet will continue to be reduced through September.

The Federal Reserve balance sheet was expanded by policies of the quantitative relief (QE) name. In QE, he purchased the Fed Treasurys U. and Securities Securities Agency. These purchasing programs took place between December 2008 and October 2014. In total, $ 3.7 trillion of securities were purchased, which was the balance sheet for $ 4.5 trillion.

The purpose of QE was to pump money into the banking system to support economic growth by reducing longer term interest rates.

Federal Reserve Balance Sheet Strategy

The Federal Reserve will stop the unwinding at the end of September 2019. The Fed is now on track to relax $ 35 billion a month in May through September. It has set an unrestricted timetable of $ 50 billion in April and then $ 35 billion for each of the next five months through September. This is an additional $ 175 billion tightening Fed, which is why it is called quantitative tightening.

On May 15, the balance sheet was marked at $ 3.865 trillion, down $ 635 billion since the end of September 2017. The relaxation will not meet the stated goal of Fed Chair Jerome Powell from a $ 3.5 trillion balance sheet. It will be $ 190 billion short. How will the Fed Chair treat this misconduct? My prediction is that quantitative tightening and quantitative easing will be the new choice of financial policy tools and therefore quantitative tightening is likely to resume following the 2020 presidential election.

The lack of a higher yield means that investors buy Treasurys.

Weekly Treasury 10 Year Product Chart

Courtesy Refinitiv XENITH

Courtesy of Refinitiv XENITH

The product on the 10 Year Note reached a peak of 3.261% during week 12 October 2018. This product fell to its average 200 week average movement of 2.350% during March 29 week. % in weekdays from April 19. As the stock becomes wild, the product now challenges its “reversal to mean” again at 2.361%. My quarterly value level is 2.759% with monthly and six monthly hinges at 2.613% and 2.605%, respectively, with an annual level of risk of 1.451%.

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Federal Reserve Building (credit photo: Getty) t

Getty

The Federal Reserve reduced its balance sheet by $ 27 billion in the week ending 15 May and continued its “quantitative tightening” strategy.

The minutes of the May 1 FOMC meeting show that the Federal Reserve will be patient with its interest rate policy. My call for 2019 remains the same: the Fed has no reasons for raising or lowering the federal funds rate, but the Fed balance sheet will continue to be reduced through September.

The Federal Reserve balance sheet was expanded by policies of the quantitative relief (QE) name. In QE, he purchased the Fed Treasurys U. and Securities Securities Agency. These purchasing programs took place between December 2008 and October 2014. In total, $ 3.7 trillion of securities were purchased, which was the balance sheet for $ 4.5 trillion.

The purpose of QE was to pump money into the banking system to support economic growth by reducing longer term interest rates.

Federal Reserve Balance Sheet Strategy

The Federal Reserve will stop the unwinding at the end of September 2019. The Fed is now on track to relax $ 35 billion a month in May through September. It has set an unrestricted timetable of $ 50 billion in April and then $ 35 billion for each of the next five months through September. This is an additional $ 175 billion tightening Fed, which is why it is called quantitative tightening.

On May 15, the balance sheet was marked at $ 3.865 trillion, down $ 635 billion since the end of September 2017. The relaxation will not meet the stated goal of Fed Chair Jerome Powell from a $ 3.5 trillion balance sheet. It will be $ 190 billion short. How will the Fed Chair treat this misconduct? My prediction is that quantitative tightening and quantitative easing will be the new choice of financial policy tools and therefore quantitative tightening is likely to resume following the 2020 presidential election.

The lack of a higher yield means that investors buy Treasurys.

Weekly Treasury 10 Year Product Chart

Courtesy Refinitiv XENITH

Courtesy of Refinitiv XENITH

The product on the 10 Year Note reached a peak of 3.261% during week 12 October 2018. This product fell to its average 200 week average movement of 2.350% during March 29 week. % in weekdays from April 19. As the stock becomes wild, the product now challenges its “reversal to mean” again at 2.361%. My quarterly value level is 2.759% with monthly and six monthly hinges at 2.613% and 2.605%, respectively, with an annual level of risk of 1.451%.

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