*On Friday, St Louis Fed President and 2016 Fed voting member James Bullard said he'd like the Federal Reserve balances to begin to run off.
*We've viewed this as the single biggest risk to US markets.
*A picture says 1000 words. You need to see for yourself what shrinking these Fed balances implies for markets.
One of the more dovish Fed voting members, St Louis Fed President James Bullard is getting more hawkish. More important than his call for an additional rate hike in 2017 was his stated goal to let the Federal Reserve Balances begin to runoff and shrink. These balances were built in the days of quantitative easing. Reinvesting maturing principles is causing the Fed to regularly buy bonds at current prices. Allowing these bonds to run off removes this major buyer and is an added risk to markets.
Visual Perspective Of What Shrinking Fed Assets Means
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