Halister News

(Bloomberg) -- While there doesn’t appear to be a consensus, prospect of FOMC beginning discussion on reinvestment policy is clearly “on the Fed’s radar,” Credit Suisse analysts led by Praveen Korapaty wrote in note Tuesday.

• Timing, how any ending of reinvestments would be phased in, remain unclear
• CS is skeptical that Fed will shrink UST portfolio in “any meaningful fashion,” though it has capacity to do so with almost $800b maturing in 2018-2019
  • Rather, most of shrinkage will likely come from “organic” reduction in MBS holdings as result of paydowns
• This discussion introduces new source of “policy-induced volatility” that can put upward pressure on term premia