Halloween has come early to the US Treasury securities market. Fed officials have been scrambling in recent days to scare investors almost every day in speeches declaring that they will continue to raise the federal funds rate (FFR) until inflation breaks. They are going trick-or-treating now because they won't be able to do so during Halloween which falls in their "blackout period" starting Saturday and ending one day after the November 1-2 meeting of the FOMC.
The mounting fear is that something else will break along the way like the entire US Treasury bond market. Yesterday's WSJ included a really spooky article titled "'Fragile' Treasury market is at risk of 'large scale forced selling' or surprise that leads to breakdown, BofA says." The fear is that a debacle like the recent one in the UK bond market could happen in the US.
While anything seems possible these days, especially scary scenarios, we would like to point out that even as the Fed is withdrawing liquidity by raising the FFR and proceeding with QT2, TINAC* might continue to provide liquidity to our bond market, especially if global investors rapidly get into the Halloween spirit. Consider the latest Treasury International Capital System (TICS) data:
