The Treasury Tightens?April 01, 2011 Posted by: Joe Morgan, CFA
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.
No, the title to this commentary is not a typo. On March 22, the Treasury announced it would sell its mortgage holdings, plunking a cool $10 billion of the securities back into the market on a monthly basis until its entire $142 billion of holdings have been depleted. On the other side of this transaction, the Treasury will do… nothing.
That’s right, they are taking money out of the system and that action falls under the textbook definition of a tightening. Certainly, this is nothing like the Fed raising rates or selling off the extra $2 trillion or so of securities that it holds over and above its 2008 balance sheet, but a tightening is a tightening, no?
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