Saturday, May 8, 2010
Fed's "exit strategy" has begun!
The Fed has quietly begun its exit strategy. Take a look at the chart below. Reserves have fallen over $200 billion since mid-February and are now just slightly over $1 trillion and headed lower.
Treasuries are rallying now because of a flight to quality, however, the Fed's engineering of this reserve drain means that rates will rise. Sell into this bond rally.