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IPFS News Link • Federal Reserve

Macquarie: The Fed Will Halt Its Balance Sheet Reduction In 3-6 Months

•, by Tyler Durden

 If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable."

Putting these two parallel processes - which threaten to materially impair dollar funding markets - in context, on one hand there is the so called "Quantitative Tightening", or the gradual decline in the Fed's balance sheet which currently sees the Fed's balance sheet shrink by $40BN/month and is set to peak at a rate of $50BN/month by Q4, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.