The Fed’s Balance Sheet Reduction (QT) Update

The Fed essentially took the week off as it relates to QT. This Fed’s 18 month tightening period has been little more than rhetoric. QT on the whole has been muted and the Fed Funds rate sits only 1 percentage point above Core CPI. Don’t forget the Fed’s Bank Term Funding Program (BTFP) - a bank bailout program which is a form of QE. I expect that the BTFP will be renewed in March 2024. In the meantime, 10-year Treasury notes will be auctioned on December 11th. This will put upward pressure on the 10-year Treasury yield.