Fed Balance Sheet - Duration Increase

Now that QE is over and the Fed's $1.25 trillion of MBS has been formally purchased, the Fed's balance sheet will gradually settle all the pending transactions through early June. In the meantime, we will instead focus on the change in duration of the Fed portfolio. Over the past month the Fed's duration has been pushed slightly outward: the reason for this has been the reduction in the ultra-short duration Term Auction Facility to just $3 billion, as well as the roll and maturity of about $10 billion in Bills from the 16-to-90 Day bucket. Next week another 18$ billion will likely roll off which is the total current balance in the Under 15 Days total. Yet the biggest issue as pointed out earlier, is the massive holdings of both long duration MBS, as well as the increasing Treasury holdings in the 5 year and over Treasury category. As Jefferies noted earlier, the DV01 on the Fed's balance sheet is roughly $1 billion.

Full maturity distribution of Fed assets by bucket:

And change in maturity profile from a month ago:

Comments

[filletandrelease]

I am trying to see how we escape massive inflation in the long run.  I just don't see how that is possible at this point.

[SayTabserb]

O/T immediately, but apropos of the prev. post on the Fed's Maiden Lane confession: consensus of opinion is that the Fed gave up the info when it did and as it did because of Easter Week lull and because the Bloomberg suit had forced their hand anyway. If the acctg is right and the Bear Stearns trash is worth less than 50 cents on the dollar, and if the MBS and CDS are not (obviously) backed by the FF&C of a GSE or the govt itself, then haven't Bernanke & Geithner violated the appropriations clause of the Constitution and the Federal Reserve Act, and shouldn't they be out on their collective ass? This was all done before TARP or any enabling legislation authorizing the purchase of this stuff, was it not? Is the country just going to go on forever countenancing one official violation of the law and Constitution after another with no consequences? To return slightly on topic, shouldn't Bernanke and Geithner's "duration" be limited to 5 pm tomorrow?

[Rainman]

Emergency powers are extremely creative. What is perceived to be outright taxpayer theft evolves into being preservation of the national interest.

The biggest roadlock to understanding is believing the Boyz are empowered to play only a straight game. 

[SayTabserb]

Roger that, but doesn't it seem that this was the reason the Fed played this thing so long with Bloomberg? Bernanke knows they had no authority to purchase non-GSE assets. These things from Bear were just garden variety CDO junk, and the Fed picked them up so Dimon & Co. would take over.  What I mean is, this has become epidemic at every level of federal government, this complete disregard for separation of powers and legislative authority, always with the same result - it gets dumped on the so-called "taxpayer," who's never going to be able to pay this off.

[non-anon]

Straight from the horses mouth...

http://www.youtube.com/watch?v=CbHTJSu_2Lk

Key House Democrat: "There Are No Rules Here ... We Make Them Up As We Go Along"

[verum quod lies]

You people are correct. Unfortunately, there are many things that have been done that conflict directly or indirectly with the Constitution and the Federal Reserve Act. Yes, they shouldn't have purchased non-Federal Government backed securities of any sort. Yes, they shouldn't have knowingly lost money (or rather knowingly transfered money/resources to such luminaries as the Giant Vampire Squid or J.P. Morgan, etc.). Furthermore, yes, things like "healthcare reform" are unconstitutional, and, no, the 'Interstate Commerce Clause' doesn't give them the authority to do it or almost anything else they claim it does. Etc., etc., etc. ...

All that noted, until the courts (especially the Supreme Court) grows a pair and enforces the laws, and especially the Constitution, we will largely sit back with mouths agap watching this and wondering how it could happen. It is has happened and is happening because in the last few decades and especially currently, as a rule, those that are largely in control of now all three branches of government don't just allow it to happen, but encourage it.

That noted, buying non-Federal backed securities at a loss and reporting that fact seems to me to be suicidal for the Fed. At some point, I hope after the November elections, they are formerly audited and even though they seem to be transparently trying to tamp down the outcry by timing the release of some of the key, for example, Maiden Lane information. For me, I can't see how releasing information they have repeatedly tried to hide would help their case or cause, unless they sense the game is up and they must try to act as if they have nothing to hide: "Congressman Paul, you keep saying the Fed has broken the law, but we released that information back before Easter and as we have kept saying, 'we have nothing to hide' and try our best to help you small minded people who hate us from become confused as to the very difficult and hard work we do here at the Fed. Furthermore, and I know it kills you, no court has thus far ruled that we have done anything inappropriate. The laws and rules are confusing for us all, and we try our best in this crazy complex world of finance. As always, we are happy to help and transparency is our middle name. And, no, I won't answer your question about how much taxpayer money we knowingly lost and transfered to technically bankrupt investment banks that are now banks. Blah, blah, blah ..."

[Sudden Debt]

So the next crisis will be in 5 years and followed by another one in 10 year :) Looks concistent enough to me :)

[slovester]

"Fed Balance Sheet"

That is an oxymoron.

[sweet ebony diamond]

the law is very unclear. words are interpreted in many ways.

the problem is bernanke is very stupid.

[mark456]

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