Fed: Pondering the unwind of QE - ANZ

Amid quiet markets, it is worth pondering the potential impact of the Fed’s signalled paring back of its balance sheet and analysts at ANZ think there is some logic to the argument that the asset classes that benefitted most from QE are likely to be among those that might suffer the most as it is unwound.

Key Quotes

“On that score, we note that since January 2010, the S&P 500 is up 126%, the Bloomberg US Investment Grade High Yield Bond Index is up 51%, and the Bloomberg US Government Bond index is up 24%. The New York Fed believes its balance sheet may normalise between 2020 and 2023, based off run offs and maturities. Fed Chair Yellen spoke of the sudden rise in term premiums to more normal levels as a financial stability risk in her Congressional monetary policy report.”