Nomura Says Fed Trims Balance Sheet in September

The video discusses the anticipated roll-off of the balance sheet, expected to start in September. It explores the gradual impact on treasury and mortgage-backed securities, and how this affects interest rates and the yield curve. The implications for the bond market and equities are analyzed, with concerns about asset reflation and current market valuations. The discussion highlights the risk and reward dynamics in equity markets, comparing them to past tapering events.

When is the balance sheet roll-off expected to begin according to the discussion?

• August

• September

• October

• November

What is one of the expected changes in the market as the balance sheet is rolled off?

• Decrease in long-term treasury securities

• Decrease in mortgage-backed securities

• Increase in short-term treasury securities

• Increase in long-term treasury securities

How will the reserves held by banks at the Fed change as a result of the roll-off?

• They will fluctuate

• They will increase

• They will remain the same

• They will shrink

What is the expected trend for bond yields in the US as discussed?

• They will decrease significantly

• They will remain stable

• They will increase aggressively

• They will grind higher but not aggressively

What concern is raised about the current equity market compared to the 2013 tapering event?

• Equity markets are more expensive now

• Equity markets are less expensive now

• Equity markets are unaffected by tapering

• Equity markets have the same risk-reward