Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses
by Tyler Durden
ZeroHedge.com
Jun 4, 2016
As the Fed has rushed headlong into boosting interest rates, it forgot one small thing: combining a duration estimate of 5.6 years with a total notional exposure of $17trn, and current Dollar price of bonds of $105.6, indicates that, to first order, a 100bp shock to interest rates would translate into a $1trn market value loss. That is using the more conservative estimate of the bond market. Using the broader bond market sizing of $40trn, the market value loss estimate would be $2.4 trillion. And just like that the Fed is trapped.
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