Federal Reserve Balance Sheet Update: Week Of October 27: A Look At Fed Asset Durations
As of October 27, the Fed's balance sheet was $2.3 trillion, of which
the $837 billion in Treasury debt is of course a fresh all time record, soon to be eclipsed by the tens of billions added weekly as per QE2. There is roughly $13 billion left under the current POMO program ending in the second week of November, which by then will be supplemented by a new and improved almost daily POMO. In the past
week, bank excess reserves increased by $16 billion after declining by $34 billion the week prior: total reserves stood
at $1,008 billion, up from $993 billion the week before. And once again foreign holdings of agency/MBS debt dropped to a new 3
year low, dumping over $100 billion agencies in the Fed's custodial account
over the past two months. Last, we take a look at the one topic that will soon be the most talked about subject by every pundit in the econosphere: the duration distribution of Fed holdings.
Summary balance sheet breakdown:
held outright: $2,039 billion, $10 billion less than the week prior.
Treasury holdings increased
from $832 billion to $838 billion.
holdings declined from $1.066 trillion to $1.051 trillion. This is a sizable drop of $15 billion in just one week: are MBS buy backs accelerating? If so, this confirms our expectations that lower rates will means greater buybacks, and greater capacity for UST purchases as part of QE Lite alone, let alone QE2.
- Agency holdings declined by $1 billion to $1510billion.
borrowings: flat at
swaps, Maiden Lane and other assets: $191
billion, slight increase W/W. FX liquidity swaps were at $60, as the bank which had pulled $500 million in USD via the swap line no longer needs it and just one bank is using the Fed's dollars, the same one that has been doing so for 3 months now. The value of Maiden
Lane I was at $28.5
billion. Maiden Lane II was at $16.5 billion, Maiden Lane III at $23.5: all increasing markedly even though the Fed is now petitioning to putback loans to Bank of America, meaning many of the loans could very well be worthless: perfect time to boost their "value."
- The monetary base was $1.964 trillion
balances with banks: $1,008 trillion, as noted above an increase of $16
billion from the prior week.
- Foreign holdings of USTs and MBS at a new all time high of $3.30 trillion, an increase of $19 billion W/W, due to an incrase in UST custodial holdings of $21 billion.
And a quick look at a topic that will soon be all the rage, the second the media picks it up: the maturity distribution of the Fed's holdings. Look for this unimodal distribution to shift ever more to the left, as the Fed is forced to buy increasingly greater billions of shorter duration, thus locking itself in an endless series of QE refinancing QEs, as Bruce Krasting point out earlier.