9 Jan 2024

Bank of America Corp. expects the Federal Reserve to announce plans to begin tapering the runoff of its Treasuries holdings in March, coinciding with its first 25 basis points interest-rate cut.

- The Reverse Repo ("RRP") is de facto QE-infinity $ printed during 2020-21 that was sitting dormant. It's now being used to buy up US Treasuries. Problem: it is declining at a very rapid pace and might be gone by the end of January 2024. - Something needs to be done to preserve QB / liquidity. - This is why the Fed is now thinking about slowing down the pace of QT. Over the week-end, Dallas Fed chief Logan said the Fed should slow Asset runoff as Reverse Repo dwindles - 2024 is an election year and we expect net liquidity to be supportive for the economy, bond markets and risk assets


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