A $1 Trillion Pain Trade in Treasuries Divides Top Bond Dealers
- Fed reinvestments financed almost half the U.S. deficit in ’16
- Loss of demand may lift funding costs, complicate Trump agenda
BlackRock, Vanguard See Gradual Fed Balance Sheet Unwind
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To appreciate just how important the Federal Reserve has been to the U.S. Treasury, consider this simple fact: It alone financed roughly 40 percent of America’s budget deficit last year.
So as Fed officials talk up the possibility of unwinding the central bank’s crisis-era bond holdings later this year, figuring out what will happen when the U.S. loses its biggest source of funding has become a pressing concern.