The Fed’s Balance Sheet Reduction (QT) Update
100% of the Fed’s “tightening” this week was in allowing T-Bills to roll off of its Balance Sheet. The Fed’s focus on T-Bills was not because Powell is a hawk. No, Powell is a dove in hawk’s clothing. Call me a cynic, but I believe Powell’s allowing a $44 Billion tranche of T-Bills to roll off the Fed’s Balance Sheet is due to the fact that Powell knows that the Fed will be a significant buyer of T-Bills before the fiscal year ends on September 30th and again after fiscal year end when the Fed will buy Treasuries to plug the forthcoming $2 Trillion-ish deficit. China does not want U.S. Treasuries, nor does Japan, and Powell is afraid to tell Yellen and Biden “No”.
Treasuries: The Fed’s Treasury security holdings declined by $43.5 billion for the week-ended April 3rd and declined by $58.9 billion on a rolling 4-week basis.
Agencies: The Fed’s Government Agency security holdings were unchanged for the week-ended April 3rd and declined by $14.8 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.
