The Fed’s Treasury holdings barely declined in the week-ended Wednesday July 12th and Agency-backed holdings were unchanged for the second consecutive week. For every Dollar the Fed has pulled out of the system through QT, Treasury Secretary Janet Yellen put the same Dollar (and then some), back into the system by winding down the Treasury’s General Account from $1.7 Trillion in January 2021 to $44 Billion in June 2023. Perhaps now that Yellen’s stimulus has ended the Fed’s mild QT effort may start to soak up some of the excess liquidity that has been floating around the equity and credit markets since April 2020 which accounts for the various valuation bubbles we have experienced across asset classes. I almost forgot to mention the Bank Term Funding Program (BTFP), which is a $2 Trillion bail out of the regional banking system and a form of back door QE. Absent the BTFP, the banking system would be finding equilibrium much more rapidly and the system would be self-correcting at a healthy pace. Instead, we have Government intervention at its worst.

• Treasuries: The Fed’s Treasury security holdings declined by $2.4 billion for the week-ended July 12th and decreased by $57.6 billion on a rolling 4-week basis.
• Agencies: The Fed’s Government Agency security holdings were unchanged over the same period and decreased by $20.0 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.

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