27% of total bank assets in the US are in #treasuries and #agency bonds. A 40 year maximum. The composition is extremely similar to the #federalreserve #balancesheet. This is no coincidence. During #QE, the motto “don’t fight the fed” was very popular in the market, and banks decided to jump the bandwagon and copy, or better yet, frontrun the #fed. What is the game plan now? Are they going to front run them again and start selling those bonds? If so, what would they buy? And if they keep them, and rates keep going up, would they account for those loses? Can they buy more treasuries and substitute the #fed as the buyer of last resort?
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