From the Fed's May 4, 2022 press release:
Plans for Reducing the Size of the Federal Reserve's Balance Sheet
....The Committee intends to reduce the Federal Reserve's securities holdings over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account (SOMA). Beginning on June 1, principal payments from securities held in the SOMA will be reinvested to the extent that they exceed monthly caps.
- For Treasury securities, the cap will initially be set at $30 billion per month and after three months will increase to $60 billion per month. The decline in holdings of Treasury securities under this monthly cap will include Treasury coupon securities and, to the extent that coupon maturities are less than the monthly cap, Treasury bills.
- For agency debt and agency mortgage-backed securities, the cap will initially be set at $17.5 billion per month and after three months will increase to $35 billion per month.....
That is an idealized shrinkage of $1.583 billion per day.
Of course the roll-off of maturing paper won't be that smooth but that's what the $47.5 billion per month works out to.
From the Federal Reserve Bank of St. Louis' FRED Database:
On June 1 the Fed had total assets of $8.915050 Trillion, the vast majority of which are U.S. Treasury bills, notes and bonds and Agency (Fannie and Freddie) Mortgage Backed Securities. On July 27, the cut-off date for the most recent H.4.1 report, total assets on the Fed's balance sheet were $8890004, A total reduction over the 57 days of $25.046 billion compared to the expected 90.231 billion.
Even more interesting is where the minimal reduction to date is not happening, the two largest line items.
From the latest H.4.1:
July 28, 2022
1. Factors Affecting Reserve Balances of Depository Institutions
Millions of dollars
|
Reserve Bank credit, related items, and |
Averages of daily figures |
Wednesday |
||
|
Week ended |
Change from week ended |
|||
|
Jul 20, 2022 |
Jul 28, 2021 |
|||
|
Reserve Bank credit |
8,865,999 |
- 4,098 |
+ 666,530 |
8,854,182 |
|
Securities held outright1 |
8,464,333 |
- 3,425 |
+ 798,688 |
8,453,907 |
|
U.S. Treasury securities |
5,733,757 |
- 798 |
+ 476,788 |
5,734,180 |
|
Bills2 |
326,044 |
0 |
0 |
326,044 |
|
Notes and bonds, nominal2 |
4,940,459 |
- 214 |
+ 413,544 |
4,940,459 |
|
Notes and bonds, inflation-indexed2 |
374,719 |
- 1,375 |
+ 27,204 |
374,719 |
|
Inflation compensation3 |
92,535 |
+ 791 |
+ 36,040 |
92,959 |
|
Federal agency debt securities2 |
2,347 |
0 |
0 |
2,347 |
|
Mortgage-backed securities4 |
2,728,229 |
- 2,627 |
+ 321,900 |
2,717,379 |
....MUCH MORE
And oddly enough, not a single question about the balance sheet run-off from the media at Chairman Powell's press conference on Wednesday.
Previously:
July 22 The Federal Reserve Is Not Shrinking Its Balance Sheet
July 15 Why Isn't The Federal Reserve Shrinking Its Balance Sheet?
July 9 Huzzah! The Fed's Balance Sheet Shrinkage Appears To Have Begun!
July 1 The Federal Reserve's Plan To Shrink Its Balance Sheet Does Not Appear To Be Going Very Well
June 27 Fed Balance Sheet: Not Seeing The Reduction In Fannie/Freddie Mortgage-Backed Securities
We deliberately waited for three weeks after the start of the program to allow for settlement issues in the Agency MBS portion of the portfolio.
Where this gets really interesting is in five weeks the plan is to increase the QT to $95 billion per month.
