Market Extra: Fed’s balance-sheet unwind will be moment of truth for financial markets

If investors have guessed correctly, the Federal Reserve will start reducing its $4.5 trillion portfolio of government securities after its two-day meeting finishes on Wednesday.

But for a meeting that could herald the reversal of quantitative easing, a policy credited by some with sparing a cataclysmic economic depression but also blamed for frothy asset valuations and low volatility, investors across all markets appear remarkably sanguine. The ICE Dollar Index DXY, -0.19% a measure of the U.S. currency against a basket of six major rivals, is trading near a three-year low, bond yields have steadily fallen since the end of last year, and U.S.

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