Federal Reserve Balance Sheet Update: Week Of January 13, $1.070 Trillion In UST Holdings

The steady climb in Fed assets continues, with the left side of Bernanke's balance sheet swelling to just under $2.5 trillion, as US Treasury holdings hit $1.07 trillion, implying that the Fed's DV01 continues to increase on a daily basis with every single POMO. The differential between the US and China is now $163 billion and rising. We expect our now second-largest creditor to realize the game theory balance of leverage (no pun intended) is shifting away from its favor (and to the Fed), and to respond accordingly.

All numbers as of December 16:

  • Securities held outright: $2,200 billion, $30 billion more than the week prior.
    • Total Treasury holdings increased from $1.031 trillion to $1.070 trillion (inclusive of yesterday's POMO).
    • MBS were flat at $992 billion. 
    • Agency holdings declined by $1 billion to $146 billion.
  • Net borrowings: flat at $45 billion.
  • Float, liquidity swaps, Maiden Lane and other assets: $205 billion, $3 billion more than a fortnight ago. FX liquidity swaps were at $70 million as that one bank continues to borrow the same amount for 4 months now. The value of Maiden Lane I declined slightly to $27 billion. Maiden Lane II was at $15.9 billion, Maiden Lane III at $23.2 billion, while AIA Aurora was $26.3 billion. And it is important to note that only the Federal Reserve would have "Other Assets" of $114 billion. That's right: undefuned "assets" of well over one hundred billion.
  • The monetary base was $2.013 trillion.
  • Reserve balances with banks: $1096 billion, an increase of $65 billion from last week. With assets increasing rapidly, it was about time this lagging liability category caught up.
  • Foreign holdings of USTs and MBS declined by $9 billion to $3.345 trillion. There has been a decline of $12 billion in foreign custodial holdings since December 22.

There are two things we would like to highlight in the data above:

  • The increase in excess reserves was notable and was long overdue. As we have shown before, since QE2, the cumulative differential between the increase in Fed assets and excess reserves has diverged materially, and last week hit an all time record of $141.1 billion. This week this differential has declined to $106.3 billion which however is still a major discrepancy, and makes one wonder what is the reason for this lack of congruity.
  • The anticipated slow-down in MBS buybacks to the Fed due to spiking interest rates is finally starting to materialize: there were no MBS repurchases in the last three weeks, with the total continuing to stay flat at $992 billion, which means the QE Lite part of Fed monetization dry powder is stagnating.

And, as usual we end with our favorite chart, showing total UST holdings by the top 5 world institutions.