The Fed's balance sheet reductions have hit $1 trillion — but market enthusiasm for bonds has held off turmoil

Wed, 09/06/2023 - 10:42

Jerome Powell and Janet Yellen — U.S. Federal Reserve Board Chairman Jerome Powell listens as U.S. Treasury Secretary Janet Yellen speaks during a meeting with the Treasury Department's Financial Stability Oversight Council at the U.S. Treasury Department on October 03, 2022 in Washington, DC.
Photo by Anna Moneymaker/Getty Images

The Fed's massive quantitative tightening campaign has had limited effect on the market.
That's as private sector participants have taken over its role in the Treasury market.
But banking reserves are still at risk if money market funds stop buying T-bills.

Since the Federal Reserve began cutting down the size of its balance sheet last year, the central bank has allowed about $1 trillion of its debt holdings to run off, but it's so-called quantitative tightening program hasn't rattled the market the way many feared it would.