Fed to Taper Bond Purchases -November 2021

On Wednesday, November 3, the Federal Reserve (Fed) announced it would begin slowing the pace (tapering) of its monthly bond purchases. Currently, the Fed is purchasing $120 billion a month of securities split between Treasury bonds ($80 billion) and Mortgage-Backed Securities ($40 billion). The tapering is a reduction of $10 billion in Treasury bonds and $5 billion in Mortgage-Backed Securities. If the fed maintains that pace of tapering, the program will end by the middle of 2022. After the announcement, which was in line with market expectations, equity markets turned positive, and government bond yields moved modestly higher. Tapering is the necessary first step in setting the stage for the Fed to increase interest rates later next year.