Economists: The Fed's expansion of its balance sheet and purchase of short-term bonds may only have an impact on the front end of the yield curve.

In a report, Eric Winograd, chief U.S. economist at AllianceBernstein, stated that the Federal Reserve's decision to begin expanding its balance sheet to ensure the banking system has "ample" reserves and to resume purchasing short-term Treasury bonds should only affect the very short end of the U.S. Treasury yield curve, without impacting the longer-term portion. He pointed out that the Fed will resume its normalized purchases of Treasury bills, with an initial target of approximately $40 billion per month. "The impact of this decision on the market should be limited to the money market and the very front of the yield curve," he added. While the balance sheet expansion itself was not unexpected, some market participants had originally expected the Fed to wait until January to begin this operation. (Jinshi)