We often focus on the Fed as the biggest liquidity provider in the public sector. But the Treasury will likely play a role as well as monetary and fiscal policymakers align on a key objective: maintaining the stability of a functional U.S. Treasury market.

This thread is worth a read to understand the why. The Fed’s toolbox may be limited, especially given the importance of market perception when it comes to policy decisions. This “stealth QE” concept is one we’ve been hitting on for a while in our Markets research and it has big implications for future liquidity conditions and the direction of market prices.

“What’s more, like the Federal Reserve, the Treasury will become a “dealer of last resort”, acting as a buyer of illiquid bonds when no other participant is willing.”