Although the Federal Reserve attempted to deliver a balanced message by announcing the slowdown of Quantitative Tightening (QT) starting in June and rejecting the likelihood of imminent rate cuts, the overall tone was perceived as dovish by markets. This perception stems from the decision to lower the monthly QT cap to $25 billion, rather than by $30 billion as suggested by some policymakers. While a $30 billion cap would have sufficed to retain T-bills on the Fed’s balance sheet, the reduction of the QT cap to $25 billion indicates a desire to retain a substantial portion of coupon bonds. With a $60 billion QT ... (full story)