The Fed’s Treasury position was essentially unchanged for the week-ended January 25th while the Fed’s Government agency/Mortgage-backed securities position was $15.2 billion lower over the last week. The housing market remains inflated in our view due the Fed’s ZIRP policy in 2020 and 2021. Many suburban housing markets that saw residential properties trade at $200/SQFT remain north of $500. If the Fed is good at two things, those two “skills” are creating and destroying asset bubbles. No bubble was bigger than the housing bubble of the past several years. For those calling for the Fed to pause next Wednesday I would caution that we still have negative real interest rates all along the Treasury yield curve.
Treasuries: The Fed’s Treasury security holdings were $1.0 billion lower over the last week and $64.3 billion lower on a rolling 4-week total basis.
Agencies: The Fed’s Government Agency security holdings were $15.2 billion lower over the last week and $16.7 billion lower on a rolling 4-week total basis.