The Fed: Why the bond market isn’t freaking out from the Fed’s shift to quantitative tightening

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The bond market is not acting like it’s hair is on fire in light of the Fed’s decision to start to let assets roll-off its balance sheet.

The Federal Reserve decision to start to shrink its balance sheet is expected to have a material influence on asset markets over time. Yet the bond market seems largely to have shrugged it off.

In late July, the Fed warned the market that the balance sheet deduction would begin “relatively soon,” which was quickly translated into the next meeting, the two-day meeting ending Sept. 20.

Since then, yields on the 10-year Treasury note have sunk from 2.285% to 2.191% Thursday.

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