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

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, liquidity 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 billion. 
  • 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).