Status: Not Logged In; Sign In

See other Business/Finance Articles

Title: Fed Faces Perilous Sell-Off: $8 Trillion Asset Unloading Threatens Treasury Crash and Mortgage Rate Surge
Source: [None]
URL Source: ... crash-and-mortgage-rate-surge/
Published: Dec 12, 2023
Author: Mike Rivero
Post Date: 2023-12-12 19:13:32 by Horse
Keywords: None
Views: 36

The Federal Reserve, facing the daunting task of selling $8 trillion in assets acquired through freshly printed money, is inadvertently steering the financial system towards a potential crisis. The linchpin of our financial stability, the treasury market, could be at risk of a crash, with the added threat of exacerbating already soaring mortgage rates.

The Fed’s misstep in financing over $6 trillion in federal deficits has left it trapped in a precarious situation, and the consequences will inevitably be borne by the public. The market is now engaged in a fierce battle with the Fed, unlike anything seen before.

Market futures are currently projecting the Fed Funds Rate to conclude 2024 around 4.00%. However, the latest Fed dot plot reveals a stark contrast, with FOMC members anticipating rates to finish at 5.125%—higher than market expectations. This discord implies a scenario where every member of the FOMC would need to be proven wrong for the market to be right, a situation where history suggests that fighting the Fed is a losing game.

Recent developments, such as the core inflation surging to 4%, double the Fed’s 2% target, further complicate the situation. The S&P futures market witnessed a significant reversal following this CPI number, revealing the market’s reliance on singular data points amid hot GDP and NFP figures. Additionally, Oracle’s cautionary outlook adds to the uncertainty.

See also The Fed lost $120 billion since 2022; it'll take about four years to bounce back before sending profits to the Treasury

As we navigate this precarious exit, the looming risk of financial instability underscores the need for vigilant monitoring of market dynamics and the Fed’s strategies. The coming months promise to be a critical juncture, with potential repercussions rippling through various sectors.

Peter St Onge, Ph.D. @profstonge

The Fed is sitting on an $8 trillion mountain of stolen goods that it needs to get rid of. Selling it could strangle credit, hike mortgages, and crash treasury markets.

By writing a blank check to Washington, the Fed stuffed an $8 trillion elephant onto a canoe. There is no elegant way to get it off.

Poster Comment:

Listen to this tweet. Scary. $10 trillion in debt to be sold. FED holds $2.5 trillion in MBS.

Post Comment   Private Reply   Ignore Thread