How the Fed affects long Bond Yields

TVC:US10Y   US Government Bonds 10 YR Yield
Inverse chart of US10Y Yield to show changes in Bond prices.
Overlayed with the following:
  • Fed Funds Rate
  • US Treasury Deposits to Federal Reserve Banks
  • Increase/Decrease Rate of change to Fed Balance Sheet
Balance Sheet Total in separate pane below

The USCBBS Percentage Change shows the money raining down :-D

It's clear to see the relationship between the Fed buying Treasuries, i.e. Quantitative Easing (QE) and the increase in US10Y prices.

Quantitative Tightening (QT) is the name of the game now. There is A LOT of QT left to do, we're at most 25% into QT since the Fed has only rolled off roughly 1Trillion. They likely have 3+ Trillion to go. Expect US10Y to be under continued pressure as long as QT is in effect. Even when Fed Funds rates are lowered it will have little effect on US10Y while the biggest buyer of Treasuries is on hiatus.

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