Operating at the Intersection of Technology and the Capital Markets
Tag: quantitative easing
The Fed continued with its modest tightening program, reducing its Treasury position by approximately $29 billion over the past week and by $72 billion on a rolling 4-week basis. However, the Fed's Balance Sheet has barely unwound the Fed's enormous inflation of the money supply (2020-2022) as depicted in the chart below. Treasuries: The Fed’s Treasury … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
Consensus is that the Fed will hike its Fed Funds rate by 25 BPS on Wednesday and then pause rate hikes as the Fed observes economic data for an undetermined period of time. The Fed ought to leave the door open for more rate hikes including a rate hike in June. Slow to Act: The … Continue reading One More Rate Hike. Then What?
The Bank Term Funding Program (BTFP) had approximately $64.4 billion in outstanding loans as of Wednesday this week. The “other credit extensions” line item of $180.1 billion includes the FDIC loans made to the regional banks over the past several weeks. March 2023 is the month the Fed reinstituted Quantitative Easing to the Capital Markets. FEDERAL RESERVE statistical … Continue reading Weekly Update: Bank Term Funding Program
The Fed allowed a modest amount of Treasuries and a larger position of Agency securities to run off its balance sheet the week ended March 29th 2023. However, when one considers the Fed’s bail out facility – the Bank Term Funding Program (BTFP) - it is clear we entered a period of Quantitative Easing (QE) … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The Fed essentially did nothing this past week in terms of tightening the money supply. QT hasn't been nearly as aggressive as the Fed's QE efforts - especially when you consider the cumulative effect of QE from 2009-early 2022. This Fed's ideology is not aligned with getting CPI down to 2% as I wrote back … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
Could the NASDAQ re-test the COVID lows of March 2020 when it sat around 6,900? Yes. That would require a prolonged recession (which we expect) AND The Fed not restarting its ultra-dovish monetary policy of Quantitative Easing combined with a near zero Fed Funds Rate. Who knows how the Fed will behave in 2H 2023 … Continue reading The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield
We wrote yesterday that we would be surprised if the Fed follows through on its stated plan to reduce its balance sheet by $95 billion per month as it seeks to unwind the heavy hand it played in 2020 and 2021 by subsidizing fiscal stimulus programs and executing its QE program. Robust Fed balance sheet … Continue reading No QT as Far as The Eye Can See
The Fed would be far more effective in controlling inflation if it were to pare its Balance Sheet versus focusing on the Fed Funds Rate. Inflation is created by excess money in the economy ("excess" money in that it is not generated from Production output but rather money printing by the Fed). The Fed could … Continue reading The Fed Should Focus On QT
"It would seem we've still got a long, long way to go" sang Phil Collins. I could not help but think of these lyrics as I reviewed the Fed's balance sheet this morning. While the Fed's Quantitative Tightening ("QT"), has only just begun, it has an enormous, multi-year project in front of it as it … Continue reading We’ve Still Got A Long Long Way To Go
10-year Treasury yields sit around 2.72% and will climb higher as the Fed: a.) lifts the Fed Funds Rate and, b.) trims its balance sheet (i.e. quantitative tightening "QT"). There is no scenario in which the Fed executes QT only to have Treasury yields move lower. It is simply a question of supply and demand. … Continue reading Treasury Yields Will Only Move In One Direction
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