Vanguard, BlackRock Seen as Forced Buyers in Fed's Bond Retreat
- QE runoff means U.S. will boost issuance as Fed demand wanes
- Passive funds will buy Treasuries as index weighting increases
This article is for subscribers only.
Looks like Vanguard and BlackRock will be buying more Treasuries whether they want to or not.
As the Federal Reserve finally starts to trim its mammoth crisis-era debt holdings, the two investment giants, both leaders in index funds, will almost certainly have to buy more to keep up with various bond benchmarks, analysts say. That’s because as the Fed pulls back, more debt issued by the U.S. government will end up in the market, prompting index providers to count the securities. (By convention, anything held by the Fed was excluded.)