Business

Earlier, we laid out how, in theory, the Fed's balance sheet unwind plan will work according to the FOMC: the Fed will trim reinvestments in TSYs at a rate of $6Bn/month initially, and MBS at $4Bn/month, or a total of $10bn/month, and will increase the reinvestment caps in steps of $10bn ($6TSY+$4MBS) at 3 month intervals over 12 months until it reaches a total 50bn per month.

Coming in earlier than many expected, the Fed for the first time laid out how it plans to "normalize" its balance sheet which it expects to reduce by trimming reinvestments in TSYs at a rate of $6Bn/month initially, and MBS at $4Bn/month, or a total of $10bn/month, and will increase the reinvestment caps in steps of 10bn at 3 month intervals over 12 months until it reaches a total 50bn per month.

Indicatively this is well below Goldman's expectation of $10bn and $5bn initial caps for TSYs and MBS, as we showed over the weekend.

Authored by Kevin Muir via The Macro Tourist blog,

Courtesy of RanSquawk

Adding further pain to Q2 GDP hope, April Business Inventories tumbled 0.2% MoM in April (following Wholesale Inventories decline). This is the biggest drop since November 2015.

• Manufacturers inventories rose 0.1% m/m in April after rising 0.2% prior month
• Wholesalers inventories fell 0.5% m/m in April after rising 0.1% prior month
• Retailers inventories fell 0.2% m/m in April after rising 0.2% prior month

The November spike in inventories is now long gone...