Bond Traders Look to Jobs for Taper Clues While Cash Glut Grows
- Fed reverse repo facility has seen usage climb to record high
- Reducing asset buying to hinge on outlook for jobs, inflation
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The glut of spare cash in dollar funding markets is combining with inflation concerns to stoke debate among investors about just how soon the Federal Reserve might have to take its foot off the accelerator.
Bond traders are keenly attuned to the buildup of dollars in short-term interest-rate markets, an overabundance reflected in the amount of money sitting and earning absolutely nothing at the Fed’s reverse repo facility. For some, that’s yet another sign that the so-called quantitative easing program ought to be dialed back from its current pace of $120 billion a month, although others say that the central bank facility is acting like it should, as a safety valve, and also point to the other factors fueling the oversupply.