The Fed is ready to reduce it's balance sheet starting now.
Quote: "The reduction of the Fed’s balance sheet, accumulated during the heart of the 2007-’09 financial crisis, also is expected to have a tightening effect on rates, pushing them higher along with the central bank’s rate-hike efforts. Wall Street is pricing in a nearly 60% chance of a rate increase before the end of 2017, up from around 37% about a month ago, according to CME Group data.
To mute the impact, the Fed is expected to take baby steps in the unwind. The current plan calls for the balance sheet to initially shrink by only $10 billion a month. The pace of the rundown would then increase by $10 billion every quarter, up to a maximum of $50 billion a month."
FUNDAMENTAL VIEW: FED IS SUPPORTING MORE UPSIDEMOMENTUM FOR GLOBAL STOCKMARKETS . Bullard: Fed 'should defend' inflation target or risk losing credibility . QUOTE: "WASHINGTON (Reuters) - The Fed needs to mount a clear defense of its 2 percent inflation target and stop raising rates until the pace of price increases strengthens, St. Louis Fed President James Bullard said on Thursday. "WASHINGTON (Reuters) - The Fed needs to mount a clear defense of its 2 percent inflation target and stop raising rates until the pace of price increases strengthens, St. Louis Fed President James Bullard said on Thursday. The central bank risks losing credibility, and perhaps triggering a recession, if it continues to insist on "normalization" without better evidence that prices are firming, he said in an interview with Reuters. "If you are going to have an inflation target you should defend it. If you say you are going to hit the inflation target then you should try to hit it and maintain credibility," Bullard said in an interview with Reuters." investing.com/news/economy-news/bullard-fed-should-defend-inflation-target-risks-losing-credibility-otherwise-540661
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FUNDAMENTAL VIEW: US TAX REFORM
Remark: US TAX cuts likel to cut tax revenues as well. US T-Bonds should face more headwinds and pressure long term.