Will curve steepening hit stock valuations?

Fed cutting down on bond purchases

The Federal Reserve asset run-off accelerates each quarter and will reach $50bn a month in Q4 2018.

In 2019, the monthly reduction may hold steady at $50bn. While the size of balance sheet has been discussed at length, its composition has attracted much less attention. The normalisation endgame indeed remains unclear.  Normalcy in central bank policy means managing overnight bank liquidity via repo transactions, i.e. purchases and sales of short-term securities. Long-term rates should be determined by market forces. The longest US bull market: What have been the sector winners and losers? However, the Fed still owns $2.3trn worth of long-term government bonds and $1.7trn mortgage...