In December, Fed Powell said the Fed’s program to reduce the bond holdings on its balance sheet was on “autopilot.” Powell later went on and raised short-term rates another one-quarter percent.
Then in late January, Fed Powell said the case for raising rates has weakened somewhat. In addition, Powell made it very clear to the Markets and used the word “patient” eight times in his speech regarding hiking interest rates.
We are now in July and at the end of the month, the Markets are expecting Fed Powell to lower rates. However, the US isn’t the only central bank lowering rates, it’s happening all over the world.
The era of quantitative tightening by major central banks is proving to be short lived.
Net bond purchases by the Federal Reserve, European Central Bank and Bank of Japan will swing back above zero from September, according to an analysis of their balance sheets by Bloomberg Economics. That’s just eleven months since they collectively hit reverse having spent a decade pumping stimulus into their economies via quantitative easing.
The outlook shows how quickly central banks have been forced to turn tail after spending much of last year leaning toward tightening monetary policy, only to now be looking to loosen it as the world economy slows.
As rates go back down, expect bonds to continue to rise. The monthly chart suggests, on the 10 year bond, price will move higher to the monthly supply at 131'00'0.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.