MNI BRIEF: Fed Balance Sheet Nearly Matches Prior Record High

The Federal Reserve's balance sheet edged up to USD7.243 trillion this week on increased holdings of Treasuries, just shy of the previous record set in mid-November, data released Thursday showed.

Over the last week the Fed's balance sheet increased USD20 billion, primarily from a USD16 billion increase in Treasury holdings. The Fed purchased about USD12 billion in nominal notes and bonds and USD4 billion in TIPS. Pending MBS purchases now totaling almost USD200 billion have yet to hit central bank's balance sheet, and will be settled over the coming months, analysts say.

On the liabilities side, the Treasury's cash balance fell to USD1.50 trillion as the federal government draws down on its record savings. The dip in the Treasury cash balance generated a corresponding USD46 billion increase in total bank reserves to USD3.15 trillion, putting additional downward pressure on the front-end rates.