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| US Bonds Review |
US Treasury bond’s overall trend, revealed by trends of price, leverage, and time, are defined in The Matrix for subscribers.
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The Fed Is Powerless To Stop The Invisible Hand
The Federal Reserve’s interest-rate decisions receive the most attention, but changes to its balance sheet are just as important, and sometimes even more influential. The Fed’s balance sheet consists of assets like U.S. Treasuries and mortgage-backed securities and liabilities such as bank reserves and currency in circulation. By buying assets, selling them, or letting them mature, the Fed directly affects long-term interest rates and the amount of liquidity in the financial system. Expanding the balance sheet through quantitative easing lowers long-term borrowing costs and stimulates economic activity, whereas shrinking it through quantitative tightening withdraws liquidity and can have a tightening effect similar to raising short-term rates. The article argues that investors often focus too narrowly on rate decisions and should pay equal attention to balance sheet policies to fully understand the Fed’s impact on financial conditions.
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