Fed Treasury Holdings Pass $1.5 Trillion

Tyler Durden's picture

It seems like it was only yesterday that the Fed passed the $1 trillion mark in total Treasury holdings (actually it was on that memorable Winter Solstice of 2010 but who's counting). Well it is not even 5 full months later, and the Fed has already added $500 billion in holdings. Following today's $6.94 billion Pomo, total Fed holdings of US Treasurys have now passed $1.5 trillion (which is ironic because the net new cash tendered to the Treasury per total Bond, Note and Bill issuance and redemption in 2011 through the most recent settled auction is $350 billion, in other words the Fed has funded about 140% of the total Treasury cash needs). As a reminder there is just under 6 weeks left until QE2 ends, at which poin the Fed's Treasury holdings will be about $1.6 trillion, and the Treasury will be without its primary (over and above the maximum) source of capital.

The Fed's lead over China continues. It is probably irrelevant that official Chinese holdings of US debt have now declined for the 5th consecutive month.

And here are the details of the most recent weekly Fed balance sheet power expansion exercise.

  • Total holdings increased by $21.2 billion in the week, as Treasury holdings increased by $29 billion, offset by $7.8 billion in MBS/Agency repayments.
  • Excess reserves declined by $8 billion, even as the Adjusted Monetary Base increased once again, albeit this is delayed so rather irrelevant.
  • Total foreign custodial holdings declined by $11.1 billion primarily due to a $16 billion reduction in Agency debt.

For those concerned about the surge in excess reserves in recent weeks, as we have noted there has been nothing odd about this (the SFP unwind was the primary driver). In fact, the cumulative change in reserves and Fed asset holdings is now precisely zero, meaning the two are in perfect alignment.

Repayments of Agency and MBS holdings continue to be at a very slow rate. Once again, just as we expected.

And lastly, while "Other Fed Assets" dipped in the last week by $6.3 billion, although this appears to be a bimonthly event, where there seems to be a reindexing event occuring. Look for a jump in this series next week.

Source: H.4.1, TIC