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Big event to impact near future asset markets: Fed's balance sheet shrinkage

One of the Fed's QT measures, the reduction of the balance sheet, is one of the best events in the second half of 2022 along with the midterm elections.

QT is expected to accelerate to $95 billion per month, and the Fed's QT size will double from September, so from September, it will fall below the monthly limit of QT and we see the T-bill repaid for the first time.

Since the beginning of the 2020 rise was caused by 1) lowering the basemoney interest rate to zero interest rate (0.00-0.25%) after the COVID-19 pandemic, and 2) increasing the assets held by the purchase of government bonds and MBS to about $9 trillion (about 1.000 trillion won), providing huge liquidity to the market, fed implements quantitative austerity (QT) to curb inflation triggered by rising markets!

It has already started QT worth $47.5 billion (approximately $64.65 trillion) every month, including $30 billion in government bonds and $17.5 billion in MBS, but the fed's announcement that it will double its size from September and the base rate announced by the fed after the upcoming vacation in September is the biggest impact on the current market!

Currently, wall Street is expected to raise at least 75bp in September...As some say, "Attention to QT expansion rather than interest rates," we should pay attention to QT change and its impact on the market.


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