Morning Update

During Quantitative Easing, the Fed put Money into the market by buying an array of treasury bonds/securities/notes/mortgage backed securities, etc.

Now every month some securities reach their maturity and historically the Fed has refinanced most of these.  With tapering, the idea was to slowly stop buying new bonds, and with tightening they will force the insurer of the bonds to find new buyers.

This means both that the liquidity that the Fed was creating in the bonds market, that was keeping rates so unnaturally low, will slowly dry up month over month.

And that banks like JPMorgan, Glodman, and the Central bank will need to find new buyers, and they’ll likely need to incentivize buying with higher returns.

Now this becomes complex because legally everyone needs to keep assets and liabilities balanced, and banks need to have minimum liquidity to manage their business, and when the Fed decides go stop playing balls, it is tight…

Morning Update – May 5th, 2022

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