MNI POLICY: Fed Balance Sheet Growth Slows as Repos Decline

By Evan Ryser

     WASHINGTON (MNI) - The Fed's balance sheet hit a record USD7.17 trillion,

growing only slightly, in a week where the Fed announced a floor on monthly bond

purchases. 

     The snapshot released Thursday shows the Fed's portfolio increased by

USD3.7 billion. Balance sheet growth in the week through June 10 was driven by

Treasury purchases gaining USD16 billion to a record USD4.15 trillion. 

     A decline in repurchase agreements by USD44 billion offset small increases

in other areas, such as the corporate credit facility and the paycheck

protection facility, according to the Fed data. 

     As the balance sheet reaches 38% of GDP, it is set to grow larger as output

shrinks and the Fed gets set to begin the "Main Street" lending facility. The

Fed's balance sheet is up 69% from USD4.24 trillion in early March.

     The Fed this week committed to maintaining at least the current pace of

buys "over the coming months" at USD80 billion per month for Treasuries, USD40

billion per month for agency MBS, and USD1-2 billion per month for agency CMBS.

The Fed said it will release tentative schedules of purchase operations twice a

month. 

     The Fed this week also kept its benchmark interest rate at near-zero,

indicating rates will stay put at least thru 2022. 

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

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