$20.7B reduction (selling) in SOMA Balance sheet and UST yields rise. Makes sense this week. UST yields have been distorted ever since QE started, now we have QT and the distortion continues in a way that seems to brings things back to normal. Is “flight to safety” back in vogue?
Please keep in mind that this QT reduction is a weekly number. The weekly number of $20.7B annualized is $1.076T
<The weekly number of $20.7B annualized is $1.076T>
At that rate, it will take the Fed 2 years to gradually remove 40% of the approximately $5 Trillion of “emergency” monetary stimulus they added over the 2 Covid years (March 2020 to March 2022).
https://fred.stlouisfed.org/series/WALCL
That’s not counting the QE the Fed added between 2008 and 2014.
“Flight to Safety” should be in vogue because the Fed has distorted business lending to such a grotesque degree that returning to the historic REAL yield of 2.5% for the 10 Year Treasury would cause business values to plunge (and many to go bankrupt) all over the country. Every baby step they take in that direction tightens the screw.
Wendy