September 1 was supposed to be the start date for the new shrinkage limits of $60 billion per month for the Fed's Treasury holdings and $35 billion per month for Fannie & Freddie mortgage backed securities. Approximately $3 billion per day/$21 billion per week for the two largest line items on the balance sheet. Here are the actual changes on the H.4.1 report for the week ended September 7:
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 |
|||
|
Aug 31, 2022 |
Sep 8, 2021 |
|||
|
Reserve Bank credit |
8,788,243 |
- 8,682 |
+ 471,355 |
8,787,483 |
|
Securities held outright1 |
8,403,339 |
- 8,811 |
+ 591,813 |
8,402,399 |
|
U.S. Treasury securities |
5,691,703 |
- 8,832 |
+ 320,592 |
5,690,760 |
|
Bills2 |
322,759 |
- 3,285 |
- 3,285 |
321,820 |
|
Notes and bonds, nominal2 |
4,893,074 |
- 7,023 |
+ 267,717 |
4,893,074 |
|
Notes and bonds, inflation-indexed2 |
375,761 |
+ 893 |
+ 18,210 |
375,761 |
|
Inflation compensation3 |
100,109 |
+ 582 |
+ 37,950 |
100,105 |
|
Federal agency debt securities2 |
2,347 |
0 |
0 |
2,347 |
|
Mortgage-backed securities4 |
2,709,289 |
+ 21 |
+ 271,221 |
2,709,291 |
A reduction of $8.8 billion vs the idealized $21+ billion, so a bit short.
Combined with European nations deficit spending to the tune of hundreds of $billions to cover their energy bills (accruing to the energy producers and worldwide liquidity) and the Chinese plowing hundred's of $billions of stimulus into their banks and property companies, the puny (vs. official inflation) interest rate moves really don't matter in the face of these immense amounts of liquidity.
In the U.S. this global flood of money and lack of balance sheet discipline shows up in the National Financial Conditions Index which remains loose despite the tough talk and political posturing:
Latest NFCI ReleaseIndex Points to Steady Financial Conditions in Week Ending September 2The NFCI was unchanged at –0.22 in the week ending September 2. Risk indicators contributed –0.03, credit indicators contributed –0.09, and leverage indicators contributed –0.10 to the index in the latest week.
The ANFCI edged up in the latest week to –0.10. Risk indicators contributed –0.02, credit indicators contributed –0.02, leverage indicators contributed –0.06, and the adjustments for prevailing macroeconomic conditions made a neutral contribution to the index in the latest week.
The NFCI and ANFCI are each constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1971. Positive values of the NFCI have been historically associated with tighter-than-average financial conditions, while negative values have been historically associated with looser-than-average financial conditions. Similarly, positive values of the ANFCI have been historically associated with financial conditions that are tighter than what would be typically suggested by prevailing macroeconomic conditions, while negative values have been historically associated with the opposite.
Tough to have a sustained equity decline when everyone is loosey-goosey
