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Quantitative easing ended quite a while ago in the US, and I would expect that the long end of the yield curve these days is a pretty good metric for the market
by dnadler 8y ago
Quantitative easing ended quite a while ago in the US, and I would expect that the long end of the yield curve these days is a pretty good metric for the market's expectation of long-term rates. Whether the curve has ever had predictive power is another question entirely.
- danieltillett 8y agoI actually wrote quantitative easing - damn auto correct :) Even though QE ended awhile ago (in the USA at least), we don't really know the long term effect of it. I would be cautious using past correlations.
- maxerickson 8y agoDoes QE end when they stop buying or does it end when they have normalized their balance sheet? They are nowhere close to doing the latter (~$5 trillion to go): https://fred.stlouisfed.org/series/TREAST https://fred.stlouisfed.org/series/TREAST https://fred.stlouisfed.org/series/MBST https://fred.stlouisfed.org/series/MBST Returning the balance sheet to historically normal levels marks the end of the increased market participation, so I think it's the better definition.
- dnadler 8y agoThat's a fair point, but I'd imagine one objective of normalization is to avoid moving the market in a substantial way, whereas the explicit goal of QE was to lower rates. I woudln't expect the Fed's participation in the market at would be meaningful, especially given the fact that they've only sold ~$100B in the past 10 or so months according to those charts. The treasury market is HUGE. (apparently > $500B ADV across all maturities)[1] [1] https://www.sifma.org/resources/research/us-treasury-trading-volume/ https://www.sifma.org/resources/research/us-treasury-trading...