Feb 21 2014 - Rate Brief
- The Fed first discussed the possibility of tapering its QE program back in early May when the 10y was hovering near 1.600%.
- A sharp sell off over the next four months would run the benchmark yield up to the 3.000% level as taper talk continued to appear in Fed commentary.
- On December 18, the Fed announced it was trimming its monthly purchases from $85 bln to $75 bln.
- The Fed then reduced its purchases by another $10 bln per month at the January 29 meeting.
- Expectations across the Street are that rates will continue to rise as the Fed tapers and the economy gains strength.
- However, data has begun to soften as the Fed pares its purchases.
- The 10y (2.750%) is now below the closing levels of the days preceding both taper announcements, so far contrary to the belief rates will rise as the Fed tapers.
- The next Fed meeting will take place on March 19 with recent Fed speak pointing to a continuation of the taper.
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