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Friday, October 12, 2018 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 10/4/18 | 2.16 | 2.22 | 2.42 | 2.63 | 2.87 | 2.97 | 3.05 | 3.14 | 3.19 | 3.29 | 3.35 |
| 10/5/18 | 2.15 | 2.23 | 2.41 | 2.64 | 2.88 | 2.99 | 3.07 | 3.18 | 3.23 | 3.34 | 3.40 |
| 10/9/18 | 2.17 | 2.25 | 2.46 | 2.65 | 2.88 | 2.98 | 3.05 | 3.15 | 3.21 | 3.30 | 3.37 |
| 10/10/18 | 2.18 | 2.27 | 2.45 | 2.67 | 2.88 | 2.97 | 3.05 | 3.15 | 3.22 | 3.33 | 3.39 |
| 10/11/18 | 2.14 | 2.27 | 2.44 | 2.66 | 2.85 | 2.94 | 3.00 | 3.09 | 3.14 | 3.25 | 3.32 |
Source: U.S. Department of the Treasury, as of 10/11/2018
QE, QT (Quantitative Tightening)… QE Again?
In the summer of 2017 the Federal Reserve announced plans to reduce the size of their balance sheet by reducing the amount of reinvestment of monthly maturing Treasuries, Agencies and MBS principal (QT). The schedule began in the 4th quarter of 2017 with a cap of $10B per month for the first quarter increasing by $10B every quarter until the 4th quarter of 2018 when the amount of the cap tops at $50B each month. Simply put, any principal received by the Fed, over the amount of the cap, will be available to purchase additional securities. Now, with the monthly cap at $50B, the Fed’s “QE” is reduced to purchasing additional bonds only with monthly roll off of principal over $50B.
Increased borrowing needs by the Treasury coupled with a reduction in the Fed’s purchases of Treasury and Agency securities each month has put increased upward pressure on rates. How much QT can the markets take? Is QE waiting in the wings?
In the summer of 2017 the Federal Reserve announced plans to reduce the size of their balance sheet by reducing the amount of reinvestment of monthly maturing Treasuries, Agencies and MBS principal (QT). The schedule began in the 4th quarter of 2017 with a cap of $10B per month for the first quarter increasing by $10B every quarter until the 4th quarter of 2018 when the amount of the cap tops at $50B each month. Simply put, any principal received by the Fed, over the amount of the cap, will be available to purchase additional securities. Now, with the monthly cap at $50B, the Fed’s “QE” is reduced to purchasing additional bonds only with monthly roll off of principal over $50B.
Increased borrowing needs by the Treasury coupled with a reduction in the Fed’s purchases of Treasury and Agency securities each month has put increased upward pressure on rates. How much QT can the markets take? Is QE waiting in the wings?
Source: Bloomberg 10/11/18
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