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FED: QT To Run About Half Its Previous Pace After Taper

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The FOMC cut Treasury runoff by $25B/month to $5B as of the start of April, in a move that doesn't come as a huge surprise after being flagged in the January meeting minutes, but only a few analysts had as a base case. 

  • We'll be interested in hearing more from Gov Waller about his dissent against the decision to taper.
  • MBS runoff will continue as usual but it's been going at a pace of closer to $15B/month owing to low mortgage prepayments, so overall QT will effectively be running at a max pace of $20B/month (vs $40B prior).
  • Swap spreads widened modestly.
  • "Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion. "
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The FOMC cut Treasury runoff by $25B/month to $5B as of the start of April, in a move that doesn't come as a huge surprise after being flagged in the January meeting minutes, but only a few analysts had as a base case. 

  • We'll be interested in hearing more from Gov Waller about his dissent against the decision to taper.
  • MBS runoff will continue as usual but it's been going at a pace of closer to $15B/month owing to low mortgage prepayments, so overall QT will effectively be running at a max pace of $20B/month (vs $40B prior).
  • Swap spreads widened modestly.
  • "Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion. "
  •  
image