There's a Big Reason Volatility Might Be Coming Back
- Traders already callling Fed’s plan ‘quantitative tightening’
- Central bank seeking to avoid repeat of 2013’s taper tantrum
Fed's Bullard Says Balance Sheet Higher Than It Should Be
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Even with the bond market’s muted response to the Federal Reserve’s plan to begin winding down its almost $4.3 trillion portfolio of mortgage and Treasury securities, there are plenty of reasons why the calm probably won’t last.
Out of style for almost a decade, volatility may be on its way back if you take a closer look at the mechanics of the Treasury and mortgage markets. Despite the Fed’s mantra of seeking to carry out its policy shift in a “gradual and predictable manner,” analysts say the effects of ending the reinvestment of the proceeds from maturing securities will still be felt.