MNI POLICY: Fed Brainard: Balance Sheet Reduction Going Well

By Jean Yung

     WASHINGTON (MNI) - Newly collected data on the Treasury market shows the

ongoing reduction of the Federal Reserve's balance sheet is running smoothly,

Fed Governor Lael Brainard said Monday.

     The Fed has shed some $300 billion in assets in the past year but that does

not appear to have sparked any deterioration in Treasury market liquidity, she

said. 

     "Treasury market has adapted well to the post-crisis regulatory regime, the

normalization of monetary policy, and technological changes in trading

processes, and that both broker-dealers and proprietary trading firms play

important, often complementary, roles in the market structure that has emerged,"

Brainard told the fourth iteration of an annual conference examining the

evolution of the Treasury market. 

     The New York Fed began hosting these conferences after the so-called "flash

rally" in October 2014 in which the Treasury market experienced unusually high

volatility and record trading volumes with a clear cause. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]