We have beaten this topic to death [5]so we won't say much more, suffice to say the chart below shows what is the key issue: too much monetization and it's game over for the reserve currency; too little and it's an uncontrolled market sell off, and with every passing week the margin for error gets less and less.
- Last week the Fed owned $1.663 trillion in ten year equivalents, or 31.59% of total
- This week the Fed owned $1.678 trillion in ten year equivalents, or 31.89% of total
In other words, the Fed's holdings of the Treasury market, expressed though the correct 10 Year equivalent basis not the completely wrong total notional, rose by a whopping 0.3% in one week!
Annualize that (especially without a taper) to understand just how cornered the Fed now is (especially with the TBAC already complaining non-stop about lack of Treasury liquidity and eligible private-sector collateral).
For much more on this, see here [5] [5].
[6]
Tick Tock... Tick Tock... Tick Tock...
Chart: Stone McCarthy