Bill,
yes, it is time to worry. I've posted this on a few threads today. I finally see what I've been waiting for. Quantitative Tightening has begun. I read the Fed's Quarterly Report on Balance Sheet Adjustments every time it comes out. So far, since the Fed's Sept. 20th announcement of Balance Sheet normalization, nothing has happened. However, in this month's report, which has numbers through the end of Oct, they just published commentary that Treasury balance declines started in early November and MBS declines started mid-November. It doesn't show up in the numbers yet, but when the next month's report comes out, we'll see the Fed's Balance sheet decline, probably by $10-20B. Watch for negative stock and bond market impacts. They are dead ahead, as Quantitative Tightening has truly begun now.
federalreserve.gov
* Between July 26, 2017, and October 25, 2017, the SOMA’s holdings of Treasury securities were little changed as a result of the FOMC’s policy of roll-ing over maturing Treasury securities at auction. Holdings of Treasury securities will begin to decline in early November as a result of the change in reinvestment policy announced on September 20, 2017.
* The SOMA’s holdings of agency debt declined between July 26, 2017, and October 25, 2017, because of bond maturities. Holdings of agency MBS increased because of the timing difference between agency MBS principal paydowns and settlement of the reinvestment of principal pay- ments from agency debt and agency MBS into agency MBS under the FOMC’s reinvestment pro- gram announced in September 2011. Holdings of agency MBS will begin to decline in mid- November as a result of the change in reinvest- ment policy announced on September 20, 2017. |
