Rates experts decode implications of Fed’s plan

NEW YORK: As equity investors cheer the Federal Reserve’s newfound caution toward shrinking the balance sheet, rates traders are still working to decode its implications.

In the fed funds market, a gentler-than-expected unwind of the central bank’s US$4 trillion portfolio reduces the likelihood that policy makers will lose control of their key target. But the sudden pivot also forces traders to rethink views on all sorts of markets and metrics, from repurchase agreements and Treasury bills to Libor and the yield curve.