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2025-10-30 18:01:19
[The Fed's Balance Sheet Reaches a Turning Point; Net Buying May Return Next Year] ⑴ The Federal Reserve announced it will end its balance sheet reduction process on December 1st, ushering in a new phase of policy. ⑵ Julius Baer's head of fixed income points out this is only the first step; central banks may become net buyers again next year. ⑶ This development means the Fed may begin net purchases of government debt next year to maintain ample reserve levels. ⑷ The policy objective is not to directly stimulate the economy, but rather to ensure liquidity in the financial system based on an operational framework. ⑸ The current rapid decline in yields offers limited capital gains; short-term yield expectations should be approached with caution. ⑹ The steepness of the yield curve still provides support; a moderate overweighting of duration to capture opportunities in declining interest rates is recommended.
