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Does the Fed Fear a Dollar Rally & Bond Crash?

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QUESTION: Numerous people have asked:

Does the FED actually also see these trends coming (strong US dollar, bond crash) ?

ANSWER: Yes. The Fed has sent people to the major banking houses and told them outright that their models are wrong. They have been telling them quietly that there may not be a rush to quality being bonds. Moreover, the selling of US Treasuries by some central banks has been an effort to try to prevent the dollar from rising. China’s holding of US Treasuries has declined to its lowest level in several years, but it is having little effect causing markets to simply coil.