A US$1 trillion pain trade in the Treasuries divides top bond dealers

New York

TO APPRECIATE just how important the Federal Reserve has been to the US Treasury, consider this simple fact: It alone financed roughly 40 per cent of America's budget deficit last year.

So as Fed officials talk up the possibility of unwinding the central bank's crisis-era bond holdings later this year, figuring out what will happen when the United States loses its biggest source of funding has become a pressing concern.