QT reverses quantitative-easing. It removes reserves from the banking system and puts upward pressure on long-term yields. Its effects are slower and less visible than a rate-hike, but it tightens financial conditions.
Traders watch QT because past episodes have coincided with stress in funding markets and equity drawdowns.
Example: from June 2022 the Fed allowed up to $95 billion of bonds per month to roll off without reinvestment.
Related: quantitative-easing, fomc, rate-hike, yield-curve