Excess Bank Reserves, Fed Balance Sheet Assets Skyrocket To Record High Levels
The saving grace of declining liquidty swaps and CPFF could only go on for so long. In the past week, the balance sheet of the Federal Reserve exploded, hitting an all time high of $2,174 billion. Furthermore, total reserves of banks with the Fed also hit an all time high of $1,047 billion. So much for the whole "banks lending newly printed money out" theory.
Total Federal Reserve balance sheet assets for the week of October 21 hit a record $2,174 billion ($68 billion higher compared to the prior week's $2,105 billion). Fed assets consisted of:
- Securities held outright: $1,678 billion (an increase of $99 billion MoM, resulting from $10 billion in new Treasury purchases, $77 billion increase in MBS and $11 billion in Agency Debt), or a massive $70 billion increase sequentially
- Net borrowings: decline of $23 billion to $265 billion. Total bank borrowings hit record, pass $1 trillion.
- Float, liquidity swaps, Maiden Lane and other assets: $230.2 billion, a $1.5 billion decrease based on a $1 billion reduction in CPFF and a $2 billion reduction in FX liquidity swaps, bringing these to a fresh 52 week low. At $41 billion in liquidity swaps, foreign banks are once again massively exposed to underfunding of dollar-based assets.
Foreign holdings increased by $28.5 billion to 2,893 billion.
Total bank reserves with the Fed hit an all time high, surpassing $1 trillion, as banks continue to hoard cash. The amount of extra lending that could have taken place but didn't was $65 billion week over week, or a $130 billion increase in just the past month. Keep in mind this is a very confusing datapoint especially in light of recent reports that the Fed's $100 billion reverse repo test was a failure, meaning despite the $1 trillion in cash presumably with the Fed, any liquidity slack in the system does not exist.