MBS RECAP: Big Bad Day For Bonds (Not Because of Japan)


Posted To: MBS Commentary

In certain circles, much was made of overnight news that the Bank of Japan would be buying fewer bonds. That's about as far as most news stories delved into the topic, despite it being more complicated than bond-buying news in the US. Let's break it down: In the US, the Fed lays out a guaranteed amount of bond buying that will occur each month. The Fed has also set in motion a guaranteed schedule of balance sheet reduction. Specifically, they will reinvest bond trading proceeds only up to the extent those proceeds exceed gradually rising caps (currently rising at $6bln/month for Treasuries and $4bln/month for MBS). The Bank of Japan (BOJ) lays out a more detailed menu of bond buying options but with more flexibility on the amount. For instance, it's most recent schedule ( feel free…(read more)

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