Fed’s Assets Fall by $16 Billion, -$220 Billion Since June 10: Week 7 of Balance Sheet Shrinkage

Fed’s Assets Fall by $16 Billion, -$220 Billion Since June 10: Week 7 of Balance Sheet Shrinkage

Repos are gone. Dollar liquidity swaps dropped further. SPVs fell to lowest since June 17. MBS dropped by $37 billion. Treasuries rose.

By Wolf Richter for WOLF STREET.

Week seven since peak balance sheet: Total assets on the Fed’s balance sheetfor the week ended July 29, released this afternoon, fell by $16 billion from the prior week, to $6.95 trillion. Since June 10, when they’d hit $7.17 trillion, they have declined by $220 billion:

Repos are gone, week 4.

After the Fed made repurchase agreements less attractive in mid-June by raising the bid rate, they fell out of use, though the Fed is still offering them:

Central-bank liquidity-swaps dropped by $5 billion.

The Fed’s “dollar liquidity swap lines” – which provided other central banks with dollars during the crisis – are falling out of use, though the program itself has been extended, just in case. This was the seventh week in a row of declines, now down to $117 billion:

SPVs & Loans fell by $3 billion, to lowest level since June 17.

Special Purpose Vehicles (SPVs) are LLCs that the Fed created and that it lends to. The US Treasury Department provides equity capital to the SPVs. The SPV then buys assets or lends.

  • 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: includes the SMCCF (Secondary Market Corporate Credit Credit) and PMCCF (Primary Market Corporate Credit Facility). Buys corporate bonds, bond ETFs, and corporate loans.
  • MSLP: Main Street Lending Program
  • MLF: Municipal Liquidity Facility
  • TALF: Term Asset-Backed Securities Loan Facility

In addition, there is Primary Credit (“Pr. Cr.” in the chart), which are loans the Fed makes directly to banks.

The balance of these entities combined dropped by $3 billion from the prior week to $208 billion, the lowest since June 17. But note how the composition has changed: The original three entities are being phased out, as new ones have been added. The PPP loan facility is by far the biggest ($71 billion):

MBS fell by $37 billion, to $1.93 trillion.

Mortgage-backed security balances are erratic on the Fed’s balance sheet, for two reasons:

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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.