Why is the US Treasury selling the debt of $4.2 trillion worth of hedge funds?
The Federal Reserve is selling more than $4 trillion in assets as it tries to fend off the prospect of an economic downturn.
The Wall Street Journal reported that the Treasury will sell assets worth $3.6 trillion in its portfolio, with the bulk of the sale being in its securities holdings.
The Treasury also has about $1 trillion in long-term debt.
The sale, to be announced Thursday, comes as the Fed continues to reduce its $4 billion annual balance sheet.
The announcement comes after Fed Chairman Jerome Powell warned investors that the Fed is on the verge of another crisis and said the U.S. economy could suffer a “catastrophic” loss if the Fed doesn’t act.
The selloff in assets is part of a wider push by the Fed to balance the books amid concerns about the health of the economy and inflation.
The Fed said Thursday it would continue to hold down the pace of its asset purchases as the economy recovers from the Great Recession.
It is currently raising its benchmark interest rate from 0.25% to 0.50%.
The move comes as stocks fall and the dollar rises against other major currencies.
Treasury Department also said it will sell $2.5 billion in mortgage-backed securities and other mortgage-related assets, part of its efforts to ease financial pressure on homeowners.
The dollar has risen against the euro since the U., a member of the euro area, was given a mandate to buy euros from its European peers.
The euro has lost about a quarter of its value against the dollar since the beginning of 2017.
The Dow Jones Industrial Average closed up 0.2% and the S&P 500 gained 0.4%.