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How could the Fed save the situation?
If long-term bond yields spiral out of control, the Federal Reserve may begin to inject liquidity again: A detailed guide on how this works.
When 30-year bond yields approached 5% briefly a few weeks ago, Collins from the Federal Reserve stated in an interview that "the Federal Reserve is fully prepared to stabilize the markets".
To stabilize the bond market, they will "inject liquidity" through operations such as LSAP - large-scale asset purchases or quantitative easing.
Central banks create bank reserves when they engage in such operations.
Bank reserves are often referred to as "liquidity".
When central banks engage in liquidity creation, they do so in the hope that it will stimulate what is called the portfolio rebalancing effect.
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