Once Again The Fed's Balance Sheet Is GROWING

And once again the culprit appears to be the Fannie and Freddie Mortgage Backed Securities.

First up, the biggest line items in the asset mix, from the most recent H.4.1:

August 11, 2022

 

1. Factors Affecting Reserve Balances of Depository Institutions

Millions of dollars

Reserve Bank credit, related items, and reserve balances of depository institutions at Federal Reserve Banks	Averages of daily figures			Wednesday Aug 10, 2022
	Week ended Aug 10, 2022	Change from week ended
		Aug 3, 2022	Aug 11, 2021
Reserve Bank credit	8,841,412	-    6,329	+  636,470	8,843,234
Securities held outright1	8,439,944	-    7,829	+  763,148	8,440,487
U.S. Treasury securities	5,720,038	-    7,905	+  430,374	5,720,572
Bills2	326,044	0	0	326,044
Notes and bonds, nominal2	4,924,116	-    9,339	+  368,994	4,924,116
Notes and bonds, inflation-indexed2	374,719	0	+   24,577	374,719
Inflation compensation3	95,159	+    1,434	+   36,803	95,692
Federal agency debt securities2	2,347	0	0	2,347
Mortgage-backed securities4	2,717,558	+       75	+  332,773	2,717,568

....MUCH MORE

And from the Federal Reserve Bank of St. Louis' FRED Database, total assets:

As we've been pointing out since the so-called quantitative tightening began on June 1 the $47.5 billion per month target tightening works out to an idealized shrinkage of $1.583 billion per day. Of course the roll-off of maturing securities won't be that smooth but as of the 11th, 72 days into the operation the expected decrease is $113.976 billion. This compares with the actual decrease of $35.912 billion. This includes the increase of $4.518 billion for the most recent reporting week.

In last week's post "This On The Other Hand May Signal The End Of The Stock Market Rally Is Close"

Earlier we mentioned we didn't much care how this jobs report came out and after seeing the Nasdaq 100 futures down 1.6% in late pre-market trade it is now down .99%, big whoop.

However, for the first time since QT was supposed to start on June 1, we saw some serious declines in both Treasury holdings and, I suspect more importantly, Agency MBS....

with it's $15.384 billion decline on the week, we said:

Another week of $10 billion+ reduction and we will call the end to the equity rally. 

It didn't happen. The Fed is not removing liquidity from the system.