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Goldman Look For $650-700bn Terminal Growth In Fed B/S


VIEW: Goldman Sachs notes that "over the past month and a half, the
Fed's b/s has contracted despite ongoing QE & a gradual increase in
several 13 (3) facilities' usage. This contraction was the result of a rapid
decline in the use of both TOMOs & FX swap lines; the former dropped
from about $200bn to zero, largely following the Fed increasing the
minimum bid rate on these operations, and the latter dropped from a
peak of about $450bn to ~$118bn. While we had anticipated a decline
in both components, the pace has been quicker than we exp.;
combined with relatively gradual growth in the CCF & MSLP Programs,
we believe there may be some modest downside risk to our projected b/s
path through the remainder of the year. Nevertheless, with repo now at
0 & the more limited room for declining FX swap lines to contribute
to an overall reduction in Fed b/s size, we exp. that the recent growth
over the last 2 weeks will continue, primarily due to continuing Tsy & MBS
purchases. The final size is likely to be $650-700bn > current levels."

MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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