Pursuits
The Fed's Next Big Decision May Not Be About Rates
- Reinvestment issue awaits as $215 billion in Treasuries mature
- Fed may need to communicate balance-sheet management policy
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Bond investors looking to the Federal Reserve next week for hints about when it will be ready to lift interest rates for the first time since 2006 may be missing a bigger question.
With policy makers seemingly making little progress on their path to raising rates, they’re also delaying resolving how they approach the $215 billion of Treasuries poised to mature and roll off the Fed’s balance sheet next year, and almost $800 billion through 2018. That’s creating uncertainty about a less-publicized issue for the central bank: how it plans to reinvest proceeds from holdings of government bonds amassed since the financial crisis, and whether it may do so in a way that addresses rising bond-market volatility.