Supply-Starved Bill Traders Are Looking to Fed Minutes for Salve
- Letting bill holdings mature is best way to start QT, Yi said
- Minutes from March FOMC gathering will be released Wednesday
Traders in Treasury bills will be closely watching minutes from the Federal Reserve last meeting for clues on the plan to unwind its $9 trillion balance sheet that could signal an easing in the supply imbalance.
Fed Chair Jerome Powell said last month details on the mechanics for the so-called quantitative tightening, or QT, will likely be revealed in the minutes. That has set the stage for the market to look at how the Fed will treat its portfolio of Treasury bills at a time when a scarcity of short-end paper commands a premium. Meanwhile, expectations are largely baked in that the monetary authority will announce the beginning of the unwind as early as next month, with coupon holdings likely subjected to a reinvestment cap used in the last round of QT that started in 2017.