Quantitative Tightening
a.k.a. QT, Balance sheet runoff
A central bank shrinking its balance sheet by selling bonds or letting them mature without replacing them, draining money from the system.
Quantitative tightening (QT) is QE in reverse. Instead of buying bonds, the central bank lets the ones it holds mature without buying new ones, or sells them outright. The money that was created to buy them quietly disappears.
It is a slow, background form of tightening. It tends to push longer-term yields up and drain liquidity. If it goes too far, short-term funding markets can seize up, as the US repo market did in September 2019, which is why central banks usually slow QT before reserves get too scarce.
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