QE-4 Cut in Half this Week. Fed’s Helicopter Money for Wall Street & the Wealthy Hits $1.8 Trillion in 4 Weeks
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
Regular folks need not apply.
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.
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: