After desperately trying to ramp to green, stocks are tumbling (along with bond yields) after The Fed confirmed that there is now a sudden shortage of bonds as demonstrated by the recent repo ops that saw zero submissions (as discussed earlier) forcing it to start cutting back, or tapering, its “unlimited QE” bond-buying next week.
Specifically, after buying $75BN in bonds through Wednesday – as it has since March 19 – the Fed said it would reduce the amount to $60BN on April 2 and 3, with the assumption that this – or lower – is the number going forward.
But wait there’s more, because after buying $50BN in MBS, the Fed’s schedule now also shows a decline in MBS purchases going forward from $50BN to $40BN next week.
These cuts are summarized below:
Stocks are unhappy…
And bonds are bid with 10Y tumbling to 67bps…
Fri, 03/27/2020 – 15:45
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Author: Tyler Durden