Federal Reserve Balance Sheet Update: Week Of October 20; Foreign MBS Holdings Drop To 3 Year Low

Tyler Durden's picture

As of October 20, the Fed's balance sheet was $2.3 trillion, of which the $832 billion in Treasury debt was a new all time record. As per the revised TIC data, Japan's latest holdings of $837 billion are about to be trampled by Brian Sack once again. More importantly, in the past week, bank excess reserves declined by $34 billion: total reserves stood at $993 billion, down from $1.026 trillion the week before. This was in addition to the Fed's $11 billion in POMO excess liquidity. Probably most importantly, foreign holdings of agency/MBS debt dropped to a 3 year low, dumping $100 billion agencies in the Fed's custodial account over the past two months.

Summary balance sheet breakdown:

  • Securities
    held outright: $2,049 billion, $3 billion less than the week prior.
    • Total

      Treasury holdings increased
      from $821 billion to $832 billion.

    • MBS
      holdings declined from $1.079 trillion to $1.066 trillion. This is a catch up to the lack of MBS repurchases in the prior two weeks.
    • Agency holdings declined by $1 billion to $151 billion.
  • Net
    borrowings: flat at
    $49 billion.
  • Float,
    swaps, Maiden Lane and other assets: $190
    billion, flat W/W. FX liquidity swaps were at $560 which is finally in sync with the ECB's disclosure from last week. The "value" of Maiden
    Lane I was at $27.9
    billion. Maiden Lane II was at $15.7 billion, Maiden Lane III at $22.8 billion while AIA Aurora was $26
  • The monetary base was $1.964 trillion
  • Reserve balances with banks: $993 billion, as noted above a decrease of $34 billion from the prior week, which offset the increase in reserves by $29 billion in the week prior.
  • Foreign holdings of USTs and MBS at a new all time high of $3.29 trillion, an increase of $15 billion W/W.

One notable item: the Fed's custodial holdings of Agency debt declined to $733 billion: the lowest since June of 2007. In fact, in the past two months, this amount has declined by $100 billion. One wonders if foreigners are abandoning the MBS space, and had exhibited some serious ESP in advance of the MBS/fraudclosure gate, selling almost 15% of their holdings (to Bill Gross).

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SloSquez's picture

Rock-n-roll....uh....am I supposed to say "Bitchez"?

gwar5's picture

The foreigners are pulling out of the station. Smart money already left.



AUD's picture

Baloney, foreigners might be 'selling' MBS but they're jumping straight into UST's.

Strikes me as the same game the Fed is playing, swapping worthless MBS for worthless Treasuries to somehow pretend they are worth something.

Unfortunately it seems to be working, note the fall in gold.

Bear's picture

Worthless yes ... but there is a liquid market for UST and getting out of MBS at par (fantasy price) makes real good sense to me 

suedallin's picture

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tony bonn's picture

"in the past week, bank excess reserves declined by $34 billion"

that's called good old-fashioned inflation. with fractional reserve banking leverage conservatively at 30:1 that represents nearly 1 trillion usd in new circulating money. wonder why the stock market is up powerfully? hint: it's not due to fundamentals.

SloSquez's picture

"market is up powerfully? hint: it's not due to fundamentals."  Ya think?

flacon's picture

I like Apples and Amazons. Makes me yum-yum-yummy! /s

bullandbearwise's picture

Where does it say a drop in custody holdings means the security was sold by the foreign owner? They could have moved the securities to the IMF or BIS...

99er's picture

One wonders if foreigners are abandoning the MBS space...

The Geithner Put.

doolittlegeorge's picture

at some point those Chinese yields become tempting.  I think ZH is spot on with the "end of MBS" and may include "securitization" for "an extended period." (in reference to their stated policy of keeping interest at zero of course.) this obviously cannot come as a surprise as "the Fed has had other priorities...like bankrolling the most bankrupt government in US history."  are we in the crisis right now?  it's hard to tell. we reside in such a looking glass world of money.  i find it really hard not to laugh uncontrollably, tho not because it is funny at all.  in fact "it's the exact opposite which really enrages people."

Battleaxe's picture

Here's the best synopsis I've seen of the Fed's activities in the beginnings of the crisis in '07-'08.



tom's picture

Foreign official holdings of Treasuries in Fed custody was up $200b in same period. Which started mid-August, right around FOMC announcement of "QE lite" and Ben's Jackson Hole speech. Looks like China anticipating QE2, selling MBS and buying Treasuries, because the latter is what the Fed is expected to be buying.