On May 4, 2022 the Federal Reserve Board of Governors issued this 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.
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 20, the cut-off date for the most recent H.4.1 report, total assets on the Fed's balance sheet were $8.899213 Trillion, a reduction of $15.837 billion over the first 50 days of the program.
This compares with the idealized $79.16 billion reduction.
Here's the latest report with the two largest asset categories highlighted:
H.4.1
|
Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks |
July 21, 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 13, 2022 |
Jul 21, 2021 |
|||
|
Reserve Bank credit |
8,870,097 |
+ 11,230 |
+ 695,866 |
8,863,752 |
|
Securities held outright1 |
8,467,758 |
+ 10,982 |
+ 827,775 |
8,461,636 |
|
U.S. Treasury securities |
5,734,555 |
- 10,538 |
+ 497,541 |
5,733,027 |
|
Bills2 |
326,044 |
0 |
0 |
326,044 |
|
Notes and bonds, nominal2 |
4,940,673 |
- 1,285 |
+ 431,248 |
4,940,459 |
|
Notes and bonds, inflation-indexed2 |
376,094 |
- 8,248 |
+ 30,178 |
374,719 |
|
Inflation compensation3 |
91,744 |
- 1,005 |
+ 36,116 |
91,806 |
|
Federal agency debt securities2 |
2,347 |
0 |
0 |
2,347 |
|
Mortgage-backed securities4 |
2,730,856 |
+ 21,520 |
+ 330,234 |
2,726,261 |
....MUCH MORE
As can be seen, the decrease in Treasury paper was more than offset by an increase in the agency stuff.
This is the second week in a row there has been an increase in total assets.
Mousing over the graph from the St. Louis Fed's FRED database total assets went from $8.8958673 Trillion to 8.899213 Trillion, an increase of $3.346 billion on the week.
There may be a couple very serious implications of what we think we're seeing but we will wait for another week's worth of numbers before laying that out.
Previously:
- Why Isn't The Federal Reserve Shrinking Its Balance Sheet?
- Huzzah! The Fed's Balance Sheet Shrinkage Appears To Have Begun!
- The Federal Reserve's Plan To Shrink Its Balance Sheet Does Not Appear To Be Going Very Well
- Fed Balance Sheet: Not Seeing The Reduction In Fannie/Freddie Mortgage-Backed Securities