Fed Balance Sheet Hits Record $2.2 Trillion In Assets On $71 Billion Weekly Increase In MBS

The Federal Reserve's balance sheet hit a new all time record of $2.19 Trillion in assets, after an unprecedented spike of over $70 billion in MBS purchases pushed the number over the previous record from late April.

  • Securities held outright: $1,774 billion (an increase of $96 billion MoM, resulting from $3 billion in new Treasury purchases, $79 billion increase in MBS and $19 billion in Agency Debt), or a massive $75 billion increase sequentially. To put this in perspective, the weekly change along is enough to finance 25 Cash For Clunkers programs. Yet this was money burned at the alter of low mortgage rates so that deadbeat homeowners who bought at the top of the speculative bubble mania don't ever have to rent, and actually live within their means.
  • Net borrowings: $218 billion. Total excess reserves declined marginally from $1.12 to $1.1 trillion. The Monetary base likewise dropped by the same amount to $1.99 trillion from $2 trillion.
  • Float, liquidity swaps, Maiden Lane and other assets: $199.5 billion. In a surprising move, the Fed's CPFF program staged its first increase in total holdings week over week, from $14.4 billion to $15.1 billion, after dropping in a straight line from its peak in January at $350 billion. FX liquidity swaps declined by a "noise" amount to $28 billion, bringing these to another fresh 52 week low. Maiden Lane I and Maiden Lane II (Bear bailout special) were at $26.3 and $15.7 billion, while Tim Geithner's Goldman rescue package better known as Maiden Lane III came at $22.9 billion.

Foreign holdings increased by $16.7 billion to $2,932 billion. A way to visualize the disproportionate increase in foreign UST holdings versus Treasury holdings is presented by the chart below. While Total foreign holdings increased by $320 billion during the time QE was in process of accumulating Treasury purchases, the Fed acquired, as expected, $300 billion. The disproportionate increase in Foreign (and Total) versus Fed holdings can be seen on the chart below.

Another way of visualizing how the Fed accounted for almost half of all UST purchases since March is on the indexed chart below. While Foreign holdings increased by 12%, those of the Fed went up by a staggering 63%. With the Fed no longer purchasing (at least so the party line goes) any more Treasuries, the question of who will step in to fill the void is an festering one.