Federal Reserve Balance Sheet Update: Week Of September 30

Tyler Durden's picture

Total Federal Reserve balance sheet assets for the week of September 30 of $2,139 billion ($6.4
billion higher compared to the prior week's $2,133 bn), now just $35
billion shy of the all time high of $2,174 billion recorded on April
22. Fed assets consisted of:

  • Securities held outright: $1,589 billion
    (an increase of $97.8 billion MoM, resulting from $18 billion in new
    Treasury purchases,
    $68 billion increase in MBS and $12 billion in Agency Debt), or $9.5 billion increase sequentially
  • Net borrowings: $307.3 billion, unchanged from prior week due to biweekly update of H.3
  • Float, liquidity swaps, Maiden Lane and other assets: $243.6
    a $3.1 billion decrease based on a 892 million reduction in CPFF and a $2.4 billion reduction in liquidity swaps
    (and other net changes).

Foreign holdings barely increased by $583 million to 2,855 billion. 

Below is an update of the correlation between Fed Securities Held Outright purchases and the S&P (from start of QE until September 30). The two lines are about to intersect, and as Fed liquidity has been the driver of this most recent rally, once the liquidity ramp is found to provide no additional boost to equities, the resultant drop in the S&P will be ugly.

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Mos's picture

Check out this post by Chris Martenson over on his site http://www.chrismartenson.com/blog/insatiable-demand-us-debt-or-somethin...


Truly unbelievable.  It seems every government in the world is printing money and buying each others debt and getting away with it.  Defying the laws of economics that have governed our planet for thousands of years.  If this was truly possible why turn off the presses?  Why not put everyone in a McMansion with a Maserati in the driveway?

Hephasteus's picture

That's how the IMF scam works. We all pretend to be in debt to other countries while every country central bank is owned by just a few people.

Cognitive Dissonance's picture

Truly the ultimate circle jerk.

Mediocritas's picture

This is nothing new, nor is it necessarily a bad thing. The "you scratch my back and I'll scratch yours" aspect of cross border Treasury purchases is essential for maintaining global economic stability during reasonably normal conditions. A nation that, for whatever reason, drifts outside normal operational parameters and needs to issue a large amount of paper could print locally and purchase, hence destroying the currency and disrupting terms of trade, or it could establish an agreement with foreign central banks, to be reversed once things stabilize.

Of course, this means that 'indirect' buyers are not, nor have ever been, reliable as a measure of true foreign interest in local debt.

The USA has now drifted so far outside normal operational parameters that there is great stress on the entire central bank system. The Fed *is* the primary buyer now (as all at ZH know), and is pulling every trick in the book to hide its activities as 'indirect'. How long this game can continue, who knows.


ZerOhead's picture

'How long this game can continue, who knows.'

That is one question that is driving me nuts...

The other?

What happens when the music stops?

Anonymous's picture

A foreign entity would be buying US debt in a case where they forecast significant depreciation of their own currency vs USD in the future. In my view this would mostly concern EU nations and EUR/USD.

I doubt Euroland can take EUR/USD at ~1.50 for long, despite the deafening silence even from the PIGS and their astronomical unemployment. They are doing their absolute best pretending that everything is all right.

We might be revisiting EUR/USD at 0.66 again some time in the intermediate future. In such a scenario, those low yielding USD bonds are going to be golden.

Icarus's picture

Every country...?

The purchases are due to the rollover from agency and MBS into short term treasuries.

ZH had an excellent article documenting this.

ghostfaceinvestah's picture

Agreed, no big mystery.  Those $1.25T of MBS that Bernanke is monetizing came from somewhere (OK, they are "new issuance" - new issuance composed of loans that have been refinanced out of old MBS - we are encouraging paydowns of old MBS to create new, which Bernanke then buys).

2 years into this crisis and I continue to be amazed at the ignorance of people in regards to the MBS market.  Ignore MBS at your own peril.

ghostfaceinvestah's picture

"The two lines are about to intersect, and as Fed liquidity has been the driver of this most recent rally, once the liquidity ramp is found to provide no additional boost to equities, the resultant drop in the S&P will be ugly."

Thanks, this has been my thesis.  My play on the liquidity has been to go strong into commodities in March, but the equity markets have risen right alongside commodities.

I am starting to wonder if the recent weakness in the market is a result of a reduction in liquidity?  The MBS purchases have slowed, not by much yet (20B this week versus a run rate of 25B), but will need to slow further as a % of the market since they stretched their timeline and the refi market may pick up a bit.

Also, at this point, the Fed is starting to "repurchase" some of the loans that were in MBS they already bought, thus new liquidity is reduced.

Has the slowdown in new liquidity already affected the equity markets?  that would be a scary thought, as new liquidity is going to slow appreciable from here.