Bank Shift From Discount Window To New Facility Continues (1/2)

As noted in our weekly Fed Balance Sheet Update- the overall size of the Fed's balance sheet decreased by $27.8B over the most recent week, the first drop since the start of March. It's still $366B bigger than it was on March 1 though. Unsurprisingly, most of the recent fluctuations are accounted for by emergency liquidity programs extended to banks (up $382.7B).

• Of the weekly drop in Fed holdings, $16.5B was due to a fall in emergency lending/liquidity facilities (the other $11.3B came via QT, largely MBS runoff), which clocked in at a still formidable $152.6B. Within that, we saw an apparent shift from the discount window (- $22.1B, though still up $83.8B this month) toward the Fed's new Bank Term Funding Program (BTFP - up $10.7B to $64.4B).
• The prevailing market/analyst assumption is that the relatively favourable lending terms on offer with the BTFP will see takeup rise over time, and that's what we've seen over the past two weeks (the prior week, discount window usage dropped $43B with BTFP offsetting that almost perfectly at $42B).
• The "other credit extensions" line item - representing Fed loans to the FDIC bridge bank for the SVB and Signature bank takeovers - remained fairly steady at $180B. Barring further bank failures that require FDIC takeovers, the latter is not going to be an upside contributor to Fed assets (and will at some point reverse).