Now, the FED is in a phase of "quantitative tightening." At its peak it held more than $4 trillion in U.S. government bonds and mortgage-backed securities. A few years ago it began reducing its holdings in those assets, and is now off-loading them at the rate of $50 billion per month.
THIS -- not a silly 0.25% increase in the FED discount rate -- is what is driving the correction in the market.
Thanks for the info. It clears up a couple of questions.
Selling US Govt Bonds in large quantities should by itself cause upward pressure on interest rates.
Btw, do you have an idea where we stand now in the process of dumping the bonds and MBS’s from the $4 trillion high point? E.g. how much left to buy back at the $50B per month rate?
$4 trillion dumped at $50B per month would be 80 months.
One would think when we’ve finished “quantitative tightening” markets would get buoyant.