Fed Securities Holdings Pass $2.5 Trillion As MBS Prepays Grind To Halt, "Other Assets" Hit Record

Tyler Durden's picture

For the first time (and when it comes to the Fed's balance sheet that phrase will be heard many times) the total notional value of Treasurys, MBS and agencies held by the Fed surpasses $2.5 trillion. $2.518 trillion as of May 11 to be precise, of which Treasurys amounted to $1.466 trillion (excluding today's POMO), $927 billion in MBS (unchanged for the third week in a row), and $125 billion in Agency paper. The total is an increase of $24.4 billion from a week prior. Following the last schedule and a half of POMO, it appears the Fed will hold approximately $1.6 trillion in total debt. On the liabilities side, to go with all this debt, the Fed also had a total of $1.544 trillion in total bank reserves (including excess and required), also a record. As the chart below shows, reserve growth has slowed down substantially after it overshot materially following the unwind of the SFP program designed to provide the Treasury with debt space. As noted above, and as we discussed previously, the level of prepayment of the Fed's agency portfolio has slowed substantially (as confirmed by this month's forecast of only $13 billion in monetizations via QE Lite), which means the natural roll off of and remonetization of the Balance sheet will be far slower than some expected. Total Fed paper maturing in under a year continues to be just under $150 billion: a number we don't expect will change substantially. Elsewhere, total other assets continue to climb, and have now hit another record of $130 billion. Lastly, the Fed's lead on the second largest holder of US debt, China, continues to increase.

Total assets:

Maturity distribution of Fed assets:

Slowing MBS prepayment:

Other Fed assets:

And top debt holders of US debt:

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EscapeKey's picture

...MethMan will now explain how perpetual deficits are possible, and why the Fed as the main buyer of treasuries in fact is bearish for gold.

DoChenRollingBearing's picture

Well, he can try anyway.

But, he may trade paper.

Not me!  I'll take the physical gold.  And give it away...

tmosley's picture

He's hitting the pipe hard, ladies and gents.

What a retard.  

DoChenRollingBearing's picture

wirtschaftswunder, that is not correct.  I own my physical gold.  I have been buying since the 1980s..

And you?

Michael's picture

Could someone list who the owners of record are of the worlds  central banks for me please?

I need to have the names of those people.

AUD's picture

But look at foreign holdings of US debt, at another record high. In face of a Federal Reserve with a significant amount of MBS of 10+ year duration on its books! That's a risky book if I ever saw it.

The entire world has gone mad.


EscapeKey's picture


Yeah I see how it's increased by $400bn, while the FRB holdings have accumulated at - at least - twice the speed.

BEARISH FOR GOLD!!!eleventyone11

AUD's picture

It's not all about the US. As long as foreigners are willing to hold US debt the current paradigm will continue, albeit in increasingly volatile fashion.

Only yesterday the Central Bank of India said it was a willing buyer of US debt. Spare a thought for the Indians, most are dirt poor as it is.

Urban Redneck's picture

It's not all about the US. As long as foreigners are willing to hold US debt the current paradigm will continue, albeit in increasingly volatile fashion.

This ignores the reality that the largest holder of US debt is the US Government (not the FED). As the trust and pension funds that hold the debt turn from cash flow positive to negative the burden on external buyers increases even with a balanced budget, zero new debt issuance, and a 0% short term borrowing cost.  What are the chances of even a balanced budget in the US? 500-to-1 is probably being to to generous to the elected ass clowns in Washington. 

JeffB's picture

Truly a scary thought, UR.


I think we'll be slamming into that wall of reality in short order.

cognus's picture

that's Deflation.... right?

or backwardation?

if gold a month out is worth less than gold today.... well, that would be bearish, eh? ... 

or - it just might mean that sellers are becoming holders

expectplannedevents's picture

It makes sense..You delay your "debt obligation" payments till the end.



francis_sawyer's picture

I hear that it only costs $5 to dig a coupon yielding Treasury note out of the ground...

But you can't EAT it...


bigelkhorn's picture

That guy from FFT is very good and called the market crash back in 2008.


He reckons there is a good chance the market might bounce here. I just

watched his live video today, He is very good and I love his membership site. 


its over at http://forecastfortomorrow.com/Trading-Club

NOTW777's picture

sure - its a natural recovery


look at that slowing MBS prepayment

NOTW777's picture

fitting that the huge Fed bar is in red

DoChenRollingBearing's picture

Good observation. What, it was only a couple of months ago that China had the tallest bar...

jomama's picture

QE to infinity, bitchez

DoChenRollingBearing's picture

+ $1500

But, this of course is good for stocks.  Friday the 13th tomorrow, POMO on!

tickhound's picture

"Lastly, the Fed's lead on the second largest holder of US debt, China, continues to increase"

Hell ya, still in 1st!!  Cuz that's how we roll

Hephasteus's picture

It's like the dot com crash only you don't even have to play the game. Just pay taxes.

FunkyMonkeyBoy's picture

Boy oh boy, that FED must be seriously rich to buy all that debt. You know, i bet, if the FED was audited, you'd find almost everything made from platinum, gold and silver. I bet the Bernanke is tucking in to a couple of foot long sausages right now holding a knife and folk made from pure platinum, sitting on a pure silver chair, at a table made of pure gold. Boy, that FED must be wealthy.

EscapeKey's picture

Don't you know - gold, platinum and other physical assets are WORTHLESS, only paper dollars are worth anything.

Ask MethMan, he's an expert.

DoChenRollingBearing's picture

Oh Shi'ite!  Worthless!  And all that money I spent on gold and platinum.  Oh, but, it's all OK.  I briefly forgot I just joined the Tinfoil Hat Brigade now last week.  I feel better.  Silly me!

Gold and platinum, I guess that will work for me after all.

EscapeKey's picture

You fool! THERE'S STILL TIME before Bernanke FLOODS the market with WORTHLESS printed gold and silver!!! SELL NOW!

DoChenRollingBearing's picture

Your evil CIA mind-control rays cannot penetrate my tinfoil hat!

But, as someone pointed out earlier today on another thread, I may have to wear tinfoil underwear too.

Caviar Emptor's picture

Yes! Along with a printing press he has a minting press

francis_sawyer's picture

... or be "priced in" forever!

Bay of Pigs's picture

In view of this type of information, which is very USD negative, it is truly amazing and astounding that we see so many gold and silver trolls on this site. I have never seen anything like it. Even former bulls like Mogul Rider have now turned totally bearish and insulting to any PM holders.

This cannot be a coincidence. ZH is being targeted by gov't creeps, financial numbskulls and other assorted assclowns. 

Arrowflinger's picture

They aren't all over there with Mish?

rocker's picture

Remember these words, "I will not monetize".

EscapeKey's picture

I also remember the Dallas Fed (I believe) stating "for the next 8 months, the FRB will monetize the deficits".

NotApplicable's picture

Also remember, those four words each have infinite meanings. So, four times infinity = plenty of wiggle room.

The ability to speak semi-intelligently while saying nothing is a valued commodity in DC.

ursus.peracto's picture

Paper promises never to be honored.

buzzsaw99's picture

They should be happy prepayments are down, prepayment is a risk. Of course non-payment is a bigger risk but what do they care, they have eliminated all risk everywhere.

LudwigVon's picture

as we discussed previously, the level of prepayment of the Fed's agency portfolio has slowed substantially (as confirmed by this month's forecast of only $13 billion in monetizations via QE Lite), which means the natural roll off of and remonetization of the Balance sheet will be far slower than some expected.

Myself for one, Rickards and perhaps BSack, all must consider the extent to which this # is wholely inadequate. The stock is not the flow. This might have worked if we had a real recovery, like in BSacks Keynesian dream.

Why a high average from here on out of 15B/mo. would mean 90B over a 6 mo. period, or 1/10th of the stimulus we have expected over the QE2 period. This is hardly comforting knowing that a ponzi must grow to be sustained. We do need both QE3 and another war. TD you think we get QE3 official hint Aug jus like 2010?

Also, I would like to see U.S. GDP -government spending. Seriously. Any links on this?


IdioTsincracY's picture

I hate decimals ... let's just make it $3 trillion!

Misean's picture

Fantasy accounting, really. I mean, if I could print money, then I have no liabilities to account for. And I certainly don't need to balance that with cash flowing assets. The only books I would need to keep would be maintanence records for the equipment and a salary ledger...

DeadFred's picture

If the other assets are interest rate puts as expected they should take a dip next time as the regular quarterly expiration dip hits. After todays 30yr auction though the demand may be high enough to disguise the dip.

Caviar Emptor's picture

There's so much paper stuffed in the basement at the Fed it's becoming a fire hazard! It's how one of the Seven Wonders of the Ancient World went down in flames (the library at Alexandria). Maybe this is how the current era comes to a close...

francis_sawyer's picture

PAPER is a barbaric relic!

It's time to re-enter the STONE age...

Paper covers rock?... Not this time around...


zippy_uk's picture

Absolutely right... in the middle of the night, after buying the insurance cover some bloke called Ben with the petrol can and the lighter...

EscapeKey's picture

NO, it's different this time because the Fed IS NOT printing dollars! They are adding it to the reserves of the big banks with reserve accounts with the Federal Reserve! It's is TOTALLY DIFFERENT to printing money.

Fuck me, even printed dollars have some sort of implicit value - electrons notifying $128bn or $256bn have none!

Caviar Emptor's picture

Ahh but even if they're not printing dollars...the bulging balance sheet is creating Anti-matter at the center of the financial universe. This creates a fundamental disturbance in the calculus they use for the economy: laws and relations that worked before no longer apply!

davepowers's picture

they are using a variant of printing called 'typing.'

they 'type' the reserves.

But typed reserves have a 'value' when used via the Fed Funds market to support stock and commodity speculation. Perhaps 'value' is not the right word, but 'impact' certainly is.

I am Jobe's picture


Over folks. Stick a fork in the pig.


jaffi's picture

And, M is having a field day.