QE may be over, but the Fed's U.S. debt hoard is about to soar

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QE May Be Over, But the Fed's U.S. Debt Hoard Is About to Soar

By Liz McCormick and Alex Harris
Bloomberg News
Tuesday, May 21, 2019

If you thought the Federal Reserve was done with quantitative easing, you might only be half right.

As soon as next year, analysts say the Fed will resume large-scale buying of debt securities -- this time just U.S. Treasuries -- in amounts that may ultimately exceed its crisis-era purchases. According to an estimate by Wells Fargo & Co., the central bank's balance sheet will rise past its historic peak as it adds over $2 trillion to its Treasury debt holdings in the next decade.

... Dispatch continues below ...



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Of course, it won't be called QE, which President Donald Trump has urged the Fed to restart. Rather than trying to drive down long-term interest rates to boost growth, the purchases are intended to replace the Fed's mortgage-bond holdings gradually as they mature and to keep ample reserves in the banking system. But the effect, some say, will nevertheless be largely the same.

"For anybody that has been in the market for the last 10 years, it will feel like QE," said Priya Misra, global head of rates strategy at TD Securities. "Once again the Fed will be the single largest buyer of Treasuries and (this time) in a non-QE world. This will be a very bullish Treasury-market dynamic." ...

... For the remainder of the report:

https://www.bloomberg.com/news/articles/2019-05-21/qe-may-be-over-but-th...

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