QE-4 Cut in Half this Week. Fed’s Helicopter Money for Wall Street & the Wealthy Hits $1.8 Trillion in 4 Weeks

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QE-4 Cut in Half this Week. Fed’s Helicopter Money for Wall Street & the Wealthy Hits $1.8 Trillion in 4 Weeks from Wolf Street

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By Wolf Richter for WOLF STREET.

Total assets on the Fed’s weekly balance sheet jumped by $272 billion in one week, to $6.08 trillion, according to the Fed’s release Thursday afternoon. Since the Fed started this spree of Wall Street and asset-holder bailout programs four weeks ago, total assets have exploded by $1.77 trillion.

But note: This increase of $272 billion is less than half of the increases in the prior two weeks. You can see this in the chart as the distance between the two markers this week shrank by half compared to the prior two weeks:

The asset side of the Fed’s balance sheet is mostly composed of Treasury securities, mortgage-backed securities (MBS), repurchase agreements (repos), “foreign central bank liquidity swaps,” and “loans.” We’ll go through them one at a time.

Treasury securities.

The Fed added $293 billion in Treasury securities during the week of the balance sheet. But the total balance sheet increased by “only” – so to speak – $272 billion. This $293 billion spike in Treasury securities this week was lower than the spikes in the prior weeks which averaged about $350 billion. This is one factor in the cut-in-half QE-4. For now, the Fed is sticking to its announcement that it would drastically cut QE from the prior weeks.

The Fed is now adding only Treasury securities with maturities of over one year (coupon Treasury securities, TIPS, and Floating Rate Notes). The balance of T-bills (non-coupon securities with maturities of one year or less) has remained roughly flat for four weeks, at $326 billion, and the Fed has only bought enough to replace T-bills that matured.

Repos on their way to irrelevance.

The Fed is offering $1 trillion per day in overnight repos plus over $1 trillion a week in term repos with various maturities reaching up to 84 days. Overnight repos unwind the next day. But term repos unwind on the maturity date, and via term repos, the market could load up on several trillion dollars in a few weeks. But that’s not happening. There are only a few nibbles every now and then.

As of today’s balance sheet, the total balance or repos outstanding has plunged by 56% from the peak on March 18, to $192 billion. Over the 7-day period, repos dropped by $70 billion, which is another factor in the shrinkage of QE-4:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.