FOMC Is Unlikely to Go ‘Cold Turkey’ on UST Reinvestments: FTN
(Bloomberg) -- Fed doesn’t want the end of UST reinvestments to “blow up in its face,” FTN strategist Jim Vogel writes in note Friday.
- Forcing Treasury to raise $800b in new cash over a two-year span has that potential; even so, a blow-up “is not FTN’s baseline forecast”
- “Financial markets have yet to grasp the key development isn’t the Fed’s decision, but what the Treasury does in response to replace funding from the Fed”
- Major events for 2H include signals from Fed about direction of balance sheet policy in 2018, and Treasury addressing its choices by November refunding announcement
- Downside would be if Fed decides to wait for more economic data before making a decision; “during the suspense, the bond market will assume the worst”
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HALISTER1Source: BFW (Bloomberg First Word)
People Jim Vogel (Ftn Financial)
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