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Fed Grip on $2.5 Trillion Treasury Stash Seen Firm for Years

  • Day of reckoning pushed off as bets on higher rates fade
  • Reinvestment policy linked with pace of target normalization
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The One Thing the Fed Should Say, but Doesn't

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The Federal Reserve’s liftoff from near-zero interest rates in December sparked angst over how quickly the central bank would start whittling down its $2.5 trillion hoard of Treasuries.

It turns out that investors in the world’s biggest bond market had little cause for concern. The weaker-than-forecast labor report for May wiped out bets that policy makers would follow up on their year-end move and raise rates when they meet Tuesday and Wednesday. What’s more, traders now see less than a 50 percent chance of the next increase coming this year.