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FEDERAL RESERVE IS SHRINKING ITS NEARLY $9T BALANCE SHEET

FEDERAL RESERVE IS SHRINKING ITS NEARLY $9T BALANCE SHEET

At the same time, central bankers from Canada to Europe are about to test the strength of global markets as they follow American hawkish policymakers in a campaign to end the bond-buying epidemic.


That is a broad view of Wall Street and beyond, according to the most popular responses from 687 donors in a recent MLIV Pulse study, as the Fed this month begins to reduce its asset confiscation through a process known as quantitative tightening.


The historic change is seen as a significant threat to technology and digital tokens - both risky assets that have risen in the Covid-era mania market before the risk of asset collapse this year.


The cheapest money era is over now. The decline in the Fed's balance sheet appears to have taken more than a year, while about two-thirds of respondents in the survey say the Treasury's 10-year bulls' tenure is over.


All of this comes in the wake of the Fed's high interest rate hikes for decades to curb heat inflation, as officials seek to withdraw the September suspension talk.


Recent gyrations in stocks, bonds and other markets have done little to stop the central US central bank from its hawkish stand, policymakers are widely expected to raise prices by half the point on June 15. The Fed began lowering its balance sheet this month with approvals. Goods will mature non-renewable at a monthly rate of $ 47.5 billion, rising to $ 95 billion a month in September.


"It is only when that amount of money and the amount of money that is available becomes so significant that its withdrawal will continue to be felt - and that is in the most speculative parts of the market," said Lisa Shalett, chief investment officer at Morgan Stanley Wealth. Managers, says Bloomberg Television.


The MLIV survey of the most vulnerable assets in the QT period campaigned for a group ranging from trading investors to market strategists. Only 7% opted for bond-backed bonds - securities that were at the heart of the 2008-09 collapse - almost half quoting technology and crypto.


Withdrawals from the system often strengthen financial conditions, all of which are equitable, which acts as a brake on economic growth. That would reduce the value of technology stocks based on their reliability in terms of future profits.


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The end of the Fed's bond purchase has forced the Treasury to sell more debt on the open market, which could put further pressure on the maturity of the bond, which plays a major role in Wall Street 's listing of companies - a storm of so-called stock growth. in particular.


Encouraged by the expansion of the epidemic policy period, the tech-heavy Nasdaq 100 Index rose more than 130% from March 2020 low before entering this year.


At the same time, cryptocurrencies are increasingly being manipulated by fluctuations in technology stocks. Since March 2020, there has been a strong positive relationship between Bitcoin and Nasdaq 100, and the relationship is strong in this year's sales.


The idea is that when money is cheaper, retailers can speculate about future digital styles in bulk. But when the liquidity party ends, that bet becomes a huge expense.


"I don't think people are fully aware of how QE has caused investors to add more power to their positions," said Matt Maley, a market expert for Miller Tabak + Co.. "Now as we pass QT, that benefit. Should be remembered."


Respondents who have been operating in the market during the financial crisis more than a decade ago are deeply concerned that a decline in the Fed's balance sheet will damage unwanted bonds. New entrants tend to worry about its impact on crypto and tech stocks.


Students are raising concerns about global trading conditions such as the popularity of the European Central Bank - meeting this week - and the Bank of England looking to strengthen their expanded balance sheets. About 53% said concerned markets underestimate the value of central bank financing outside the US.


Only 8% described QT as generally overcrowded. Yet the main concern for MLIV students remains the extent to which the central US bank will raise the estimated borrowing costs in this cycle. Another 61% said the rate at which the supply level reached the top is more important than the rate at which the balance sheet decreases.


As for the QT end match, about two-thirds say the main thrust is likely to come from a negative development rather than a further inflation outbreak. Some 38% say economic hardship will lead to the end of the balance sheet, while 20% point to market disruptions.


Only 10% voted for problems related to bank financing and temporary subsidy markets. That is the full confidence vote in the Fed's steps to avoid the financial crisis that led to its intervention in 2019 during its previous consolidation program.


For many, the low-cost era and the big bank balance sheets are all they know professionally. Some 46% of MLIV respondents were unemployed in the markets prior to the widespread acceptance of global bulk after 2008.


Few have ridden the Treasury bull market for decades. The strongest majority of students - 64% - say that the bullish trend for fourteen years is over, with market players with significantly more knowledgeable hawkish than their younger counterparts.


"Every time you see a big change in finances, there is a chance you will see a market disruption and that could lead to violent trade behavior," said Ed Moya, a senior market analyst at Oanda.


Source: yahoo




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