(Bloomberg) -- With the Federal Reserve telegraphing plans to begin slowing the pace of its balance-sheet unwind, market participants are rushing to determine just how soon the end of quantitative tightening could start.

Strategists at Bank of America Corp. and Barclays Plc predict that the central bank is likely to begin tapering the program in April, with the runoff wrapping up by mid-summer. Deutsche Bank AG expects the unwind start in June, while Morgan Stanley is telling clients that policymakers want to give markets plenty of time to prepare, and won’t act until September.

Speculation over the central bank’s plans mounted after Dallas Fed President Lorie Logan over the weekend said officials may need to slow the pace at which they shrink the balance sheet amid signs of scarcer liquidity in financial markets. The timing is critical for traders. An early end to the balance-sheet unwind means less Treasury supply that has to be absorbed by the private sector.

“The big question is timing,” said Gennadiy Goldberg, head of US interest-rate strategy at TD Securities. TD expects the Fed to halt the runoff by June. 

Dollar swap spreads, the difference between the fixed leg on interest-rate swaps and the yield on similar-maturity Treasuries, widened on Monday following Logan’s comments.

Read More: Logan Says Fed Should Slow Asset Runoff as Reverse Repo Dwindles

For over 18 months the Fed has been letting as much as $60 billion in Treasuries and $35 billion in agency debt holdings mature every month without reinvesting the proceeds.

Efforts to communicate plans for how and when the runoff will end underscore just how much policymakers want to avoid a repeat of 2019, when increased government borrowing exacerbated a shortage of bank reserves that was created when the Fed slowed its buying of Treasuries and investors took up the slack. Overnight rates for repurchase agreements — widely relied upon by Wall Street banks to fund day-to-day operations — jumped five-fold to as high as 10%, and order was only restored after the Fed restarted purchases of repos to stabilize the market.

Back then, the central bank was only letting as much as $30 billion in Treasuries and as much as $20 billion in agency debt run off — nearly half the size of the current plan. 

“Any guess about the timetable is necessarily speculative at this point because the Fed has not yet given us much specific guidance about its thinking,” Wrightson ICAP economist Lou Crandall wrote in a Monday note to clients. “Given the FOMC’s apparent desire to lay the groundwork well in advance, it is hard to see any change occurring much before the June meeting.” 

Just how much longer the balance sheet unwind can continue will depend on how quickly balances at the reverse repurchase agreement facility — a key measure of excess liquidity in the financial system — drain. Logan said the Fed should slow QT as usage approaches a “low level.”

Demand is currently around $700 billion, down from a peak of $2.55 trillion in December 2022. Some Wall Street strategists have hinted that the Fed should halt QT altogether before usage of the so-called RRP is closer to zero, so that any surplus cash sitting in the facility can be redeployed into the repo market in the event there’s ructions in the overnight markets. 

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