U.S. Bank: Fed's October Balance Sheet Trim Risks Rise

BlockBeats News, October 21st, Bank of America stated that the risk of the Fed's balance sheet reduction in October has increased. Wrightson ICAP's economists pointed out signs of funding pressure in the repurchase market, which may prompt the Fed to announce at next week's rate decision that it will no longer continue to shrink its bond holdings. Fed Chair Powell hinted earlier this month that he is waiting for the right time to end the balance sheet reduction, and last week's slight turbulence in the repurchase market may be a key signal. The institution also expects the Fed to start buying Treasury bonds to offset maturing mortgage-backed securities, thus maintaining the overall balance sheet size. In summary, as the Fed shifts to a neutral policy stance, the market's monthly supply of short-term government bonds may decrease by around $20 billion. (FXStreet)