Bank of America Economists Question Potential Fed-Treasury Agreement Impact

Bank of America economists have raised questions about investor speculation regarding a potential 'coordinated agreement' between the Federal Reserve and the U.S. Treasury. According to Jin10, the bank suggests that the definition of such an agreement remains unclear and believes the market has likely already absorbed its potential impact. The economists argue that unless the agreement extends beyond current market discussions, it is unlikely to cause significant price fluctuations. The focus of the agreement is expected to be on the Federal Reserve's balance sheet reduction and U.S. Treasury bond issuance. They predict that if monetary policy is affected—a scenario they deem unlikely—or if the Treasury limits long-term bond issuance, which they consider possible, the market impact could be more substantial.