Reply #86: The Fed is no longer purchaser of first resort..

[girl gone mad]

so the money can start to flow back into Treasuries, or it can move into reserves which are functionally equivalent to bonds, as we've talked about before. Treasury has also just started selling off tens of billions of dollars in mortgage bonds.

Whether or not investors buy government bonds, they are less likely to choose the same high risk assets they were drawn to while quantitative easing was in effect. The overall economy looks too weak to sustain recent price levels without the monetary stimulus, even after modest declines. There doesn't appear to be anything on the horizon which will change this outcome, but you never know.