Back in May, when we coined the term “Taper Tantrum” before the infamous Hilsenrath article was released bringing with it famine, pestilence and a full rerun of the 1994 blow out in yields and when the prevailing consensus was that Bernanke wouldn’t touch the rate of monthly monetization until December or even 2014, we forecast that as a result of a the declining US deficit (primarily due to a brief spike in GSE remittances to the Treasury until the closed loop of lower monetization ends any myth of a “housing recovery” and pushes US deficits wider again) Bernanke will have no choice but to taper QE by $20 billion (or else risk destabilizing an already illiquid TSY market even more) with the announcement due at the September FOMC meeting. Just to avoid any confusion, we also showed just what such a September tapering would look like in the grand context of QE.
But when, and by how, much does Wall Street see the end of tapering, and what is the sell-side consensus? The list below summarizes the current view by bank.
- Goldman – Sept taper, – $20b in Tsys
- JPMorgan – Sept taper
- Credit Susse – Sept taper, -$20b via -$10b MBS and -$10b Tsys
- BNP – Dec taper w Sept’14 ending; – $10b ea Tsys/MBS; poss less MBS/more UST’s
- Barclays – Sept taper of – $10b Tsys/- $5b MBS, end buys in Mar’14
- Bank of America – Dec taper but ‘sizable chance’ of Sept
- Deutsche Bank – Sept taper, risk of Dec
- Pierpont– Sept taper;
- BMO – Sept taper;
- RBC – Sept taper likely
- Citi- Sept announce, start taper with Oct 1 buys to $60-65b, stop in mid’14
- ING – Sept taper in Tsys;
- BTM-UFJ – Sept taper
- ScotiaBank – Dec taper
- Jefferies – Oct announce taper, go to smaller buys in Nov
- Nomura – Sept announce taper, begin taper in Q4
- Cantor Fitzgerald -first taper in Sept, of Tsys -$10B and MBS -$5B
Consensus: September tapering start with ~$20 billion in initial reduction. As we said over two months ago.