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Latest Fedspeak On QT

  • George (2022 voter, hawk) said earlier that more forceful balance sheet shrinking could allow the Fed to hike less aggressively, which could help avoid financial imbalances.
  • She didn’t indicate when QT should start aside from being earlier than in the previous cycle, but is worried about the impact of the balance sheet on the long-end in particular, which could be depressing “longer-term yields by as much as 1.5pps according to some rules-of-thumb”.
  • Bostic (non-voter, hawk) meanwhile wants to see the response to rate hikes before balance sheet normalisation, which could start after ‘a few’ rate hikes.
  • TYH2 has rallied to session highs of 128-00+ following these comments, just under Friday highs of 128-01 but off initial resistance at 128-14+ (20-day EMA).

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