Bank of America: "Potential Agreement" Between US Treasury and Fed Unlikely to Shake Markets

Odaily According to economists at Bank of America, speculation among investors about a potential "coordinated agreement" between the Federal Reserve and the US Treasury is raising questions. The bank believes such an agreement is "ill-defined" and its likelihood has likely already been priced in by the market. "Unless the agreement's content goes beyond the scope of current market discussions, any new agreement will struggle to trigger substantial price fluctuations." Bank of America stated that the agreement would primarily revolve around the Fed's balance sheet reduction and US Treasury issuance. Economists anticipate that if monetary policy is affected (which the bank considers highly unlikely) or if the Treasury limits long-term bond issuance (which Bank of America sees as a possibility), the impact on the market would be greater. (Jin10)