Getting rid of MBS faster and shifting to short-term Treasury bills will be on the list.
The Fed shed $32 billion in assets in January, according to the Fed’s balance sheet for the week ended February 6, released this afternoon. This reduced the assets on its balance sheet to $4,026 billion, the lowest since January 2014. Since the beginning of this “balance sheet normalization,” the Fed has now shed $434 billion.
According to the Fed’s plan released when the QE unwind was introduced in 2017, the Fed is scheduled to shed “up to” $30 billion in Treasuries and “up to” $20 billion in MBS a month for a total of “up to” $50 billion a month. So how did it go in January?
Treasury Securities
The Fed sheds Treasury securities by allowing them to “roll off” without replacement when they mature. It does not sell them outright. When Treasury securities mature, the Treasury Department transfers money in the amount of face value plus any outstanding interest to all holders of those securities. Treasuries mature mid-month or at the end of the month.
On January 15, $1.78 billion of TIPS (Treasury Inflation-Protected Securities) matured, plus $305 million in inflation compensation. On January 31, three issues of Treasury notes and bonds matured, totaling $11.7 billion. This did not reach the cap of $30 billion. So for the month, all Treasury securities that matured were allowed to roll off without replacement. This, in addition to some other items, reduced the total balance of Treasury securities by $17 billion, to $2,206 billion – down by $260 billion since the QE unwind began:
