{"id":266349,"date":"2021-06-04T04:38:00","date_gmt":"2021-06-04T01:38:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/is-the-fed-tightening-cycle-already-happening\/"},"modified":"2021-06-04T04:38:00","modified_gmt":"2021-06-04T01:38:00","slug":"is-the-fed-tightening-cycle-already-happening","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/is-the-fed-tightening-cycle-already-happening\/","title":{"rendered":"#\n  Is the Fed \u2018tightening cycle\u2019 already happening?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a28a0c448fcb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a28a0c448fcb\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/is-the-fed-tightening-cycle-already-happening\/#No_tapering_of_Feds_main_bond-buying_program_yet\" >No tapering of Fed\u2019s main bond-buying program yet<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/is-the-fed-tightening-cycle-already-happening\/#Joy_Wiltermuth\" >Joy Wiltermuth<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Is the Fed \u2018tightening cycle\u2019 already h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ening?<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"No_tapering_of_Feds_main_bond-buying_program_yet\"><\/span>\n  No tapering of Fed\u2019s main bond-buying program yet<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000293971\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       The Federal Reserve surprised markets this week by announcing it will begin to gradually sell off its corporate debt holdings accumulated during the pandemic, a tiny step toward dialing back its far reach into financial markets.<\/p>\n<p> The central bank\u2019s holdings of corporate bonds and related exchange-traded funds account for about $14 billion in combined assets, or roughly 0.1% of the $10.6 trillion U.S. corporate bond market.<\/p>\n<div class=\"paywall\">\n       But the Fed\u2019s move away from corporate debt does signal a shift in its prior full-throttle approach to the crisis.<\/p>\n<p>\u201cI think it\u2019s a good sign,\u201d said Patrick Tadie, Wilmington Trust\u2019s head of structured finance, adding that it shows the Fed thinks that \u201csome supports in place for a while may not be as necessary, and that private-sector investors should be able to pick up the slack.\u201d<\/p>\n<p>The reaction in funds that specialize in U.S. corporate debt has been muted since Wednesday\u2019s announcement, with the closely watched iShares iBoxx $ Investment Grade Corporate Bond ETF<br \/>\n        LQD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/206919681\/composite\" class=\"negative\">-0.39%<\/bg-quote><br \/>\n       down 0.4% Thursday, the iShares iBoxx $ High Yield Corporate Bond ETF<br \/>\n        HYG,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/204471305\/composite\" class=\"negative\">-0.21%<\/bg-quote><br \/>\n       off by 0.2% and the SPDR Bloomberg Barclays High Yield Bond ETF<br \/>\n        JNK,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/202941311\/composite\" class=\"negative\">-0.14%<\/bg-quote><br \/>\n       down 0.1%. <\/p>\n<p>Stocks also booked modest declines Thursday, with the Dow Jones Industrial Average<br \/>\n        DJIA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598065\/realtime\" class=\"negative\">-0.07%<\/bg-quote><br \/>\n        off 0.1%, but enough to snap a five-day win streak.<\/p>\n<p>Meanwhile, the return investors earn by owning corporate debt has dropped dramatically since the Fed swooped in roughly a year ago with its first-ever purchases in the sector. <\/p>\n<p><strong>Read:<\/strong> The Fed has bought $8.7 billion worth of ETFs. Here are the details<\/p>\n<p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/fred.stlouisfed.org\/series\/BAMLC0A0CM\" class=\"icon none\">Investment-grade<\/a> and <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/fred.stlouisfed.org\/series\/BAMLH0A0HYM2\" class=\"icon none\">high-yield<\/a> U.S. corporate bond spreads, or the premium bonds pay over a risk-free benchmark, have been inching closer to 20-year lows, helped along by the Fed\u2019s backstop. <\/p>\n<p>So what\u2019s the big picture? The Fed\u2019s corporate assets represent a drop in the bucket compared with its record<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.federalreserve.gov\/monetarypolicy\/bst_recenttrends.htm\" class=\"icon none\"> nearly $8 trillion<\/a> balance sheet, which has nearly doubled in size since March 2020, mainly through its massive $120 billion-a-month program to buy risk-free Treasurys<br \/>\n        TMUBMUSD10Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">1.625%<\/bg-quote><br \/>\n       and agency mortgage bonds.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>That\u2019s the main liquidity program the Fed talks about in terms of restarting asset purchases in a crisis or when considering \u201ctapering\u201d as the economy recovers.<\/p>\n<p>While no tapering plans for that key bond-buying program have been put on the table yet, debate has emerged within the central bank about when to discuss scaling back purchases as the threat of COVID-19 subsides in the U.S. with ramped up domestic vaccinations and as progress picks up elsewhere.<\/p>\n<p>New York Fed President John Williams weighed in Thursday, saying that he thinks it\u2019s too soon for the central bank to start slowing down its asset purchases.<\/p>\n<p>But signs of overkill with the Fed\u2019s Goliath-like presence in the Treasury and mortgage-bond markets already might be emerging, particularly as banks struggle to find places to park cash overnight and housing prices skyrocket. <\/p>\n<p><strong>Read<\/strong>: Why demand for Fed\u2019s reverse repo facility is surging again<\/p>\n<p>Mortgage lending also has slowed as 30-year home loan rates have ticked up and as more eligible borrowers have refinanced during the pandemic, adding to concerns that the Fed\u2019s $40 billion-a-month mortgage bond purchases might need to slow.<\/p>\n<p>Still, some investors view the Fed\u2019s corporate-debt exit as timely, particularly since the program has been a success in terms of helping to limit corporate defaults during a global public-health crisis, but also that it would be easy to restart.<\/p>\n<p>\u201cThey came in with shock and awe,\u201d said Nicholas Elfner, co-head of research at Breckinridge\u00a0Capital Advisors. \u201cNow they are pulling it back \u2014 but they are there.\u201d<\/p>\n<p>\u201cEssentially, there is kind of a feeling that the Fed will be involved in U.S. bond markets, as needed,\u201d he said. <\/p>\n<p>\u201cWhy wouldn\u2019t they do it again?\u201d<\/p>\n<p><strong>Read next<\/strong>: Why the bond market might not suffer another taper tantrum when the Fed signals it\u2019s ready to move<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Joy Wiltermuth\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Joy_Wiltermuth\"><\/span>Joy Wiltermuth<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-747C-53E513C11E11%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Is the Fed \u2018tightening cycle\u2019 already happening? &#8221; No tapering of Fed\u2019s main bond-buying program yet The Federal Reserve surprised markets this week by announcing it will begin to gradually sell off its corporate debt holdings accumulated during the pandemic, a tiny step toward dialing back its far reach into financial markets. The central&#8230;<\/p>\n","protected":false},"author":1,"featured_media":266350,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-266349","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/266349","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=266349"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/266349\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/266350"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=266349"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=266349"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=266349"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}