Two Different Maturities.
True on the UST balance sheet they never really mature. Rolled over with either higher or lower periods to maturity.
However, if a holder (like the Fed) holds on to maturity, then indeed the UST pays them for the retired bond.
This is a gradual liquidate, without an outright sale that would spook the crap out of the market. Assuming the average maturity held by the Fed is ten years, it would then take the Fed 10 years to liquidate it's entire balance sheet.
There is a problem here, and that is that the Fed typically increased the size of it's balance sheet by 6% prior to 2008. So if the Fed is liquidating by 10% + not adding a tradition 6%, this mean the Fed annually is being restrictive by 16%
However, other central banks...esp Japan, could well pick up the 16% difference. There is also the question if Europe will follow the US and also be restrictive which would add to the tightening.
Don't forget the Fed is counting on price inflation which currently is trending down. Check our SLV:GLD as a wonderful indicator for price inflation. Right now if running a matched race between G or S, the running order of the five horses would be G,G,G,G,G, with the stalking horse also being the deflationary loving G.
