At every percentage rise in
the Treasury less fed funds spread like this, the Fed has loosened.
Not exact matches
The yield on the 10 - year
Treasury note dipped, suggesting
less concern about a
Fed rate increase.
The shrinkage amount will grow gradually until October of this year when the
Fed will roll over $ 30 billion
less each month in
Treasuries going forward than it had in prior years.
Because banks held few excess reserves, it took only modest adjustments to the size of the
Fed's balance sheet, achieved by means of open - market purchases or sales of short - term
Treasury securities, to make credit more or
less scarce, and thereby achieve the
Fed's immediate policy objectives.
The interest that the
Fed earns on all of its debt securities —
less a relatively small amount to cover the
Fed's own operating expenses — gets paid into the General Account of the US
Treasury.
From no wealth effect realization to meaningful financial market distortions to
less Treasury issuance ahead, the
Fed knows the costs and the risks (financial bubbles) of further QE are outweighing the
less than hoped for positives.
As the
Fed continues to reduce its balance sheet, in 2018, it will repurchase $ 420 billion
less in fixed - income securities (mainly U.S.
Treasury securities) than the maturing debt that rolls off.
They tend to be
less affected by
Fed rate uncertainty than
Treasuries and have benefitted from firmer credit conditions at the low end of the quality spectrum (high yield).
The 6 - month change in employment (using Household Survey data) had turned negative and the spread between 2 - year
Treasury yields and the
Fed Funds rates fell to
less than -1.3 percentage points.
Mortgage rates follow the yield on the 10 - year
Treasury bond, so what is happening with the short - term targets from the
Fed matters far
less.
If so, there might be
less need for the
Fed to expand the money supply by buying more U.S.
Treasuries.
I try to be an optimistic kind of guy, but I don't see how this situation can be changed without firing a lot of people, including most of the most powerful people at the
Fed,
lesser banking regulators, and US
Treasury.
Granted, seniorage gains / losses go back to the
Treasury, which then can borrow
less or more in response, but as the
Fed's balance sheet gets more complex, it makes it more difficult to gauge their policy responses, and I think it will lead to a lack of trust in the
Fed and the US Dollar.
They don't have the analytical meanpower to deal with the complexity of one derivative swap book, much
less all of them, the hedge funds, the securitizations, the CDOs, etcAt best, they could contract it out, asking the investment banks as a consortium to set up a separate company to do the analysis for the New York
Fed, and the Department of the
Treasury.
The bottom line is that if you are trying to get a measure of how much
treasury bond rates will change over the next year or two, you will be better served focusing more on changes in economic fundamentals and
less on Jerome Powell and the
Fed.