Expanding QE into Treasurys could cause general yield levels to decline by around 25 basis points, which could raise the pace of the Federal Reserve portfolio runoff from $25 to $30 billion per month up to $40-45bn in the short term, according to JPMorgan Securities analysts.

Over the next 12 months, the Fed would be selling nearly $300 billion mortgages and buying Treasurys as they reinvest paydowns, estimated JP Morgan. Bank of America Merrill Lynch estimated approximately $550 billion in Fed portfolio runoff in one year, or half the portfolio, in a down 75 basis point scenario.

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