The Fed’s Balance Sheet Reduction (QT) Update
The Fed trimmed its T-Note and T-Bond position while increasing its Treasury floating rate note (FRN) and TIP positions. Net, net, the Fed reduced its Treasury holdings by $29 billion for the week. The Fed’s Agency position was unchanged for the week. The Fed has trimmed its balance sheet by approximately $1.7 Trillion since May 2022 after having grown it by $5 Trillion from January 2020 to April 2022. Thus, QT hasn’t been much of a tightening effort. QT has failed to pack the punch required to remove excess liquidity from the system. Instead, the Fed’s QT effort has proved to be flaccid - much like Fed Chairman Jerome Powell’s leadership.
Treasuries: The Fed’s Treasury security holdings declined by $28.7 billion for the week-ended June 5th and declined by $60.0 billion on a rolling 4-week basis.
Agencies: The Fed’s Government Agency security holdings were unchanged for the week-ended June 5th and declined by $17.4 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: HERE.
