If the Fed's holdings of long-dated securities were shrinking like other parts of the curve, or even at all, more of these bonds would be available to the wider market.
Wang recognizes that if the Fed held fewer longer-dated securities these yields might be even higher, but also points out that the Fed's holdings are largely determined by what Treasury issues.
All told, the Fed's 'QT 2' is almost twice the pace of QT 1.
Reuters Image Acquire Licensing RightsSince the Fed started QT 2, its total holdings of Treasury bills and bonds have fallen to $4.93 trillion from $5.77 trillion.
The average profile of Fed-held Treasury debt is longer than total outstanding Treasury debt, and getting longer.
Persons:
Sukree, Benson Durham, Piper Sandler, Joseph Wang, Wang, Pierre, Olivier Gourinchas, Neel Kashkari, Jamie McGeever, Andrea Ricci
Organizations:
Rights, Fed, Treasury, Reuters, Monetary, Minneapolis, Thomson
Locations:
Kasikornbank, Bangkok, Rights ORLANDO , Florida, Durham