Bank of America: Potential Deal Between the U.S. Treasury and the Federal Reserve Unlikely to Shake Markets

Bank of America economists point out that investor speculation about a potential "coordinated agreement" between the Federal Reserve and the U.S. Treasury is raising questions. The bank believes such an agreement is "undefined" and the possibility has likely already been priced into the market. "Unless the agreement goes beyond the scope of current market discussion, any new agreement is unlikely to trigger substantial price volatility," Bank of America says, adding that the agreement will primarily revolve around the Fed's balance sheet reduction and U.S. Treasury issuance. Economists predict a greater impact on the market if monetary policy is affected (which the bank considers highly unlikely) or if the Treasury restricts long-term debt issuance (which Bank of America considers possible). (Jinshi)