Wednesday, January 25, 2017

Who's Going To Pay For $1T Fiscal Spend?

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*The Fed is talking about shrinking their balance sheet.

*China and Japan are selling US Treasuries.

*Fiscal policy is going to need higher rates to get funded. When it happens it's a weight on markets.

The Fed Is Looking To Shrink Their Portfolio
We recently reported that Fed Chair Janet Yellen said last week that,
"The end-date for reinvestment draws closer."
She was referring to ceasing the practice of reinvesting maturing principle amounts, letting the Fed balance sheet shrink.
That balance sheet is over $4T in assets. Shrinking exactly at the time when the US government will need funds removes a huge buyer.
In fact most of the Fed's balance run-off will coincide in the coming years exactly when fiscal spending is expected to pick up.
Source: Bloomberg
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