Via Wolf Street

Crazy charts to document our crazy times.

By Wolf Richter for WOLF STREET.

Total assets on the Fed’s balance sheet for the week ended August 19, released this afternoon, rose by $53 billion, to $7.01 trillion, the second week in a row of increases, after two weeks in a row of declines. Total assets are now down by $158 billion from their peak on June 10.

We’re going to look at the five major QE-related categories on the Fed’s balance sheet: repos, central bank liquidity swaps, special purpose vehicles (SPVs), mortgage-backed securities (MBS), and Treasury securities.

Repurchase Agreements (Repos) remained at zero, 7th week:

Central-bank liquidity-swaps dropped by $4 billion.

The Fed’s “dollar liquidity swap lines” by which it provided dollars to a select group of other central banks, are falling out of use and are down to $96 billion, from a peak of $448 billion in early May. The Bank of Japan accounts for $77 billion, or 81% of the total. Swaps with the ECB fell to $8.7 billion. Swaps with the Bank of Mexico have been flat at $4.9 billion since the beginning of July. Swaps with the Swiss National Bank ticked down to $2.8 billion. Swaps with Singapore were flat $1.9 billion. Swaps with the rest of the central banks have matured:

SPVs flat at $200 billion, -$14 billion from 7 weeks ago.

The Treasury Department provides the equity capital to these Special Purpose Vehicles (SPVs) and the Fed lends to them. The amounts reflected in those SPVs reflect the sum of the equity capital from the Treasury Department and the loans from the Fed – turns out, the Fed has barely lent to them, because these SPVs have not been very active.

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Even the corporate bond & bond ETF SPV is little used.

The Fed holds the corporate bonds and bond-ETFs it purchased in the SPV Corporate Credit Facilities or CCF (yellow in the chart below). The balance of the CCF has been about $44 billion since mid-July. But the Fed didn’t buy $44 billion in corporate bonds and ETFs. Far from it.

The CCF contained just $12 billion in bonds and ETFs at the end of July, the Fed disclosed in a separate detailed report. The rest was mostly the unused equity capital from the Treasury.

There are the SPVs:

  • PDCF: Primary Dealer Credit Facility
  • MMLF: Money Market Mutual Fund Liquidity Facility
  • PPPLF: Paycheck Protection Program Liquidity Facility
  • CPFF: Commercial Paper Funding Facility
  • CCF: Corporate Credit Facilities: Buy corporate bonds, bond ETFs, and corporate loans.
  • MSLP: Main Street Lending Program
  • MLF: Municipal Liquidity Facility
  • TALF: Term Asset-Backed Securities Loan Facility

About one-third of SPV balances are in the PPP loan facility (red), with which the Fed buys PPP loans from banks:

MBS rose by $44 billion to $1.98 trillion, flat with a month ago.

Balances of mortgage-backed securities (MBS) are erratic due to timing issues. Holders of MBS receive pass-through principal payments when mortgages are paid off, such as during the current refinance boom; and it takes 1-3 months for the Fed’s purchases of MBS to settle, which is when the Fed books the trades. These two go in opposite directions, hence the declines and rises:

Treasury securities rose by $25 billion to $4.35 trillion.

All year, the Fed has increased its Treasury holdings in a range between about $6 billion and $29 billion a week, except for the 10-week period, starting in mid-March and ending in mid-May, when it went hog-wild, buying as much as $362 billion in the week ended April 1. So this – the weekly increases in its holdings of Treasury securities since January 1 – makes for a crazy chart, to document our crazy times:

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The balance of Treasury securities continues to ease higher at the pre-Pandemic pace, after the mega-burst in March, April, and May:

Under the Fed’s asset purchase program, the wealth of America’s 600-plus billionaires ballooned by $434 billion, to $3.4 trillion, while over 30 million people lost their jobs. Read… The Rich Got Richer During the Pandemic, Bailed Out by the Fed. How it Happened and Why That’s Bad for the Economy

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