MNI POLICY: Fed Balance Sheet at Record $6.72T, Growth Cools

By Evan Ryser

     WASHINGTON (MNI) - The Federal Reserve's balance sheet reached another

record of USD6.72 trillion as of May 6, with growth again slowing over the last

two weeks compared to its fever-pitch pace in March. 

     The weekly snapshot, released each Thursday, shows the Fed's portfolio

increased by USD65.5 billion over the past week. 

     Balance sheet growth was driven by Treasury securities rising USD48.7

billion to a record USD4.02 trillion, though those securities purchases

continued to slow. Mortgage-backed securities holdings shrank by USD17.8 billion

to USD1.605 trillion from the prior week.

     Use of the Fed's central bank liquidity swap lines, which allow foreign

central banks to exchange their local currency for dollars, grew by USD5.9

billion, less than last week's USD29.2 billion, to USD444.9 billion. The Fed has

swap arrangements with five central banks and on March 19 added swaps with nine

others to be in place for at least six months.

     Since early March, the Fed has slashed interest rates to zero, restarted

bond purchases and rolled out an unprecedented range of programs to keep credit

flowing. The Fed's balance sheet is up almost 60% from USD4.241 trillion in the

first week of March.

     --EMERGENCY PROGRAMS

     Use of the Fed's emergency programs rolled out in March is shrinking. The

Fed's primary dealer credit facility shrank by USD10.6 billion and the money

market liquidity facility declined by USD3.5 billion. The commercial paper

funding facility grew by only USD616 million.  

     The Fed's paycheck protection program funding facility grew by USD9.7

billion in the last week, just USD2 billion less than last week. 

     Loan balances for the Fed's discount window, its last-resort lending

program, dropped to USD26.5 billion, its lowest level since it spiked March 18

to USD28.2 billion, just after interest rates were slashed. 

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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