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https://www.barrons.com/articles/federal-reserve-quantitative-tightening-stock-market-51662736146

The Federal Reserve now owns about a third of both the Treasury and mortgage-backed-securities markets as a result of its emergency asset-buying to prop up the U.S. economy during the Covid-19 pandemic. Two years of so-called quantitative easing doubled the central bank’s balance sheet to $9 trillion, equivalent to roughly 40% of the nation’s gross domestic product. By adding so much liquidity to the financial system, the Fed helped fuel significant gains in the stock, bond, and housing markets, and other investment assets.

Now, with inflation rampant, the Fed is unwinding this liquidity via a process known as quantitative tightening, or QT. In June, the central bank started to shrink its portfolio by letting up to $30 billion of Treasuries and $17.5 billion of mortgage-backed securities, or MBS, roll off its balance sheet, or mature without reinvesting the proceeds. The amount will double this month and effectively kicks in Sept. 15, as Treasuries are redeemed midmonth and at the end of the month.

The Federal Reserve now owns about a third of both the Treasury and mortgage-backed-securities markets as a result of its emergency asset-buying to prop up the U.

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