The mammoth task of shrinking the Federal Reserve’s $9tn balance sheet has finally begun.
On Wednesday, the US central bank will stop pumping the proceeds of an initial $15bn of maturing Treasuries back into the $23tn market for US government debt, the first time it has done so since it kicked off its bond-buying programme in the early days of the coronavirus pandemic.
While the Fed has flagged its plans for so-called quantitative tightening well in advance, investors are not clear what the impact will be of a process that has never been attempted at such scale before. The move could further unsettle a bond market already battered by speculation that the Fed is poised to accelerate the pace of its interest rate rises.
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