As the Trump administration continues to inspire growth in the equity markets around the expectation of deregulation and fiscal infrastructure increases, the FED's outlook has changed from hesitantly waiting to raise rates (as was the case during the Obama administration) to bringing rates up quickly to prevent the economy from "overheating." As the FED looks to raise rates, they also want to do something about their $4.5 trillion balance-sheet that they accumulated during several rounds of quantitative easing that took place in an attempt to stimulate the U.S. economy in light of the great recession.
As the FED looks to unload their balance sheet, the first step is not selling. They will likely move to adjust their re-investment policy. Currently, profits from the bonds on their balance sheet are re-invested into more bonds which serves to increase their holdings. Investors will keep sharp eye on the FED especially in the MBS market, as the offloading and lack of re-investment will have a large impact on both the primary and secondary mortgage markets.
Original Article - http://www.cnbc.com/2017/04/18/fed-official-backs-bond-pairing-this-year.html
No comments:
Post a Comment