Bond traders seek shelter ahead of FOMC meeting
They're piling into safest, most liquid securities available or buying Treasuries
New York
THE greatest monetary-easing cycle in the history of the US has left a mind-boggling amount of cash floating around in the economy. Banks hold US$2.5 trillion in excess reserves - money they essentially don't know what to do with - at the Federal Reserve.
So as the Fed prepares to raise interest rates from near zero as soon as next week, bond investors are on edge. Beyond all the "is-this-the-right-move" questions that surround every increase, there's a logistical concern: With so much cash sloshing around, will Fed officials be able to nudge rates as high as they want? Will the new-fangled tools they've created to engineer the move work, or instead sow the kind of confusion that can dent the Fed's credibility and spur a broader market selloff?
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