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Bond Market Absorption of New Money Despite Multiple Factors
Last year, despite a significant influx of new money into the market, Treasury prices did not collapse but were absorbed by the market. This phenomenon occurred despite the absence of quantitative easing and regulatory changes, and the Federal Reserve also injected a trillion dollars into UST. Despite these factors and a 100 basis point short-end curve hike by the Fed, the bond market remained stable, reflecting potential economic and financial risks that are underappreciated. There is a prevailing demand for safety and liquidity due to potential vulnerabilities in the economy and commercial real estate sector.