FX168 Financial News (Hong Kong)-according to Bloomberg, the Fed has taken great pains to arrange the next reduction of its balance sheet of 450 million US dollars, but one key detail is not clear: what to do with the reinvested money?

Fed Chairman Yellen and other FOMC officials are likely to talk about the issue at a two-day currency decision-making meeting on Tuesday, which is widely expected to hold interest rates.

According to Fed watchers surveyed by Bloomberg, FOMC may not announce plans to shrink its table until September. Respondents estimated that there was only a 13% chance of announcing a shrinking table this week.

At present, the Fed does not actively manage the duration of its reinvestment, but allocates the money pro rata to bonds sold by the Treasury.

For now, the market expects the initial phase of the contraction plan to proceed slowly, with the Fed initially reinvesting more of its maturing bonds than directly recovering it.

As a result, the decision on how to reallocate money has a significant impact on investors, including the liquidity of long-term bonds, that is, shorting, depending on the Fed's choice.

"as far as this mechanism is concerned, this seems to be the last outstanding issue on the balance sheet."Bank of America CorporationMark Cabana, head of short-term interest rate strategy in the United States in New York.

Mark Cabana also said, "if the Fed is going to make major changes to its reinvestment policy, that will have an impact." "

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