The Fed’s Balance Sheet Reduction (QT) Update

Year-to-date the Fed has trimmed its balance sheet by $44.4 billion on the Treasury side and $44.3 billion on the mortgage side. Given Powell’s recent comments, I expect for the Fed to continue to allow mortgage securities to roll off its balance sheet and to offset that roll off with Treasury purchases at the long-end of the curve (e.g., yield curve control). Market manipulation has become the norm since 2008. Longer-term, such monetary policy can only put downward pressure on the Dollar and upward pressure on real yields.

• Treasuries: The Fed’s Treasury holdings were unchanged for the week-ended March 26th. The Fed’s Treasury holdings declined by $16.3 billion on a rolling 4-week basis.

• Agencies: The Fed’s Government Agency security holdings declined by $14.3 billion for the week-ended March 26th. The Fed’s Government Agency holdings declined by $14.3 billion on a rolling 4-week basis.

• The Fed’s balance sheet holdings: https://www.newyorkfed.org/markets/soma-holdings

• Excel file: Our Excel file detailing the Fed’s holdings of Treasury and Agency securities over time: HERE.