FED Balance Sheet October 2014

It is worth reviewing the FED Balance Sheet to see where things are. They are well above $4.4Trillion but growing at a slower rate. As the FED stated today:

The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 
 

The above is a slightly modified version of the BS. Finally below we show the two dominant elements:

Thus we have $4 trillion + in Treasury and Mortgage securities they have to unload. Just what that will do is uncertain. The bigger concern is that if the FED is no longer "buying" Treasury stuff, then who will and at what price.

This is clearly an issue to watch closely. Two things: (i) unwinding the stuff above, (ii) getting people to buy US Treasury debt.