Fed Balance Sheet: For The Week Ending October 12 The Reduction Was Nine Bucks

I exaggerated in the headline, but in the context of an $8,724,000,000,000 ($8.7 Trillion) balance sheet you'd need a magnifying glass to spot the difference.

As we've noted previously, it would be difficult to have big counter-trend rallies such as yesterday's 1300 point swing in the DJIA if The Federal Reserve were actually shrinking their balance sheet according to the stated plan: $60 billion per month/$2 billion per day, reduction in treasuries and $35 billion per month/$1.1 billion per day in agency MBS paper.

Instead, we see this, from the FRB's latest H.4.1 report, October 13:

 

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 Oct 12, 2022
	Week ended Oct 12, 2022	Change from week ended
		Oct 5, 2022	Oct 13, 2021
Reserve Bank credit	8,724,877	-    3,383	+  292,782	8,724,414
Securities held outright1	8,330,937	-    9,054	+  378,211	8,330,346
U.S. Treasury securities	5,630,432	-    9,054	+  174,806	5,629,841
Bills2	305,232	-    4,172	-   20,812	304,652
Notes and bonds, nominal2	4,849,432	-    4,837	+  152,320	4,849,432
Notes and bonds, inflation-indexed2	375,761	0	+    8,291	375,761
Inflation compensation3	100,008	-       44	+   35,008	99,996
Federal agency debt securities2	2,347	0	0	2,347
Mortgage-backed securities4	2,698,158	0	+  203,405	2,698,158

....MUCH MORE

A nine billion dollar reduction in the treasury portfolio, versus the expected $14 billion and zero ($0.00) reduction in the MBS portfolio versus the expected $7.7 billion decline.

Here's the graphic depiction from the Federal Reserve Bank of St. Louis' FRED database of the total increase/decrease in the balance sheet including all the much-smaller line items that are not part of QT and which tend to balance out over time:

Once more repurposing one of my favorite Warren Buffett quotes, originally on the change in the Dow Jones Industrial Average's closing price:

December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00

“Now I’m known as a long-term investor and a patient guy, but that is not my idea of a big move.”
-Warren Buffett

The graph is interactive (mouseover), not a big move.

And not a big move since the start of QT at $8.915 trillion on June 1.