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Economics, Financial Services

Who’s got the biggest interest rate risk mismatch of all? The Fed, of course

The financial institution with by far the largest mismatch of anybody is the Federal Reserve itself, with its $2.8 trillion of overnight floating rate deposits funding very long-term, fixed rate mortgage and Treasury securities, with no hedging. So in addition to pumping up asset price inflations through its “QE,” the Fed has sucked a gigantic amount of interest rate risk into itself. read more >