MNI Fed Balance Sheet Tracker - Jul 14, 2023

EXECUTIVE SUMMARY:

• Four months on from the crisis triggered by Silicon Valley Bank’s collapse, the Fed’s balance sheet has signalled a slow but sure unwinding of stress in the banking sector.
• Fed data suggests that banks have stabilized funding via FHLB lending and large time deposits, mitigating need for Fed assistance.
• Overall Fed asset holdings are smaller now than before the SVB crisis. With ongoing quantitative tightening, we should continue to see new cycle lows in the Fed’s balance sheet size going forward.
• The flipside of the decline in Fed assets from the peak is the reduction in liabilities. A key focus in coming months is whether reserves decline to a point that they are scarce - so far there is little evidence of this happening, which is positive from a liquidity perspective.

For full PDF analysis:

FedBalanceSheet-Jul142023.pdf

Fed Assets, $BSource: Federal Reserve, MNI