There’s currently a liquidity event going on, as people speculate someone is blowing up and that’s what’s causing the systemic forced selling of bonds pushing yields up. Whether that’s Japan or China, someone has to absorb it, assuming the Admin keeps putting pressure on markets. If the FED were to respond, I don’t think it would focus on rates. This isn’t a problem about borrowing becoming expensive or inflation expectations quickly growing—it’s about trust in the system and a liquidity vacuum that needs filling before the flywheel spins further out of control. But by who? These are the main buyers of bonds: 1. The FED 2. US commercial banks 3. Foreigners (central banks, oil exporters, etc) 4. MMFs, pension funds, insurance funds And only 2 of them are price-insensitive buyers. You guessed it right: the Fed (via QE) and US banks. Although these are constraint by the current SLR requirement, which forces big banks to hold a certain amount of capital against all assets, including Treasuries. If we have to guess, I think an SLR exemption is more likely in the short term than full-blown QE, because it: • addresses (at least partially? temporarily?) the liquidity problem without pumping reserves into the system like QE would. • is more about deregulation than monetary policy, making it easier to justify politically: "it isn’t stimulus, it’s ensuring liquidity". It aligns with current administration proposals. • was already done in march 2020 and it worked • is less market-disruptive than QE, which might further increase inflation expectations • maintains credibility, as Powell has said in numerous occasions that QE would only be used when rates = 0 Maybe this time it isn’t even called "SLR exemption" and they come up with a new name (they love this), so pay attention to the language and understand what it actually means. QT fully stopped and SLR exemption enabled to boost market stability and liquidity absorption + pause on rates to maintain credibility about inflation mandate and independence from the Government, with forward-guidance that Fed will do everything in its power to maintain a proper functioning of the credit markets.