Monetary Seesaw – The Treasury and Fed at Opposite Ends

Based on available information today, and assuming the FOMC continues to direct reduced purchases on this pace of $15 billion per month, by June of 2022 (8 months) the Fed will no longer purchase assets into the SOMA. 

The Potential to Move Markets

Putting it together, and assuming the trends continue, the Treasury is likely to reduce coupon issuance by $8 billion per month and the Fed will reduce tapering by $15 billion per month, leading to a net increase in coupons in the market of $7 billion per month.

The increases and decreases in fixed income supply have the potential to move interest rate markets and part of the curve in interesting ways.  It will be important to watch these trends and manage the risk accordingly.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

 

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