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Reserves Remarkably Steady Despite Multiple Tests (1/3)


Fed balance sheet data out Thursday (per our Fed Balance Sheet Tracker update today) showed that bank reserves in the system remain ample, rising by $106B in the month to Oct 18th, to $3.25T.

  • That’s despite a $32B pullback in extraordinary lending to banks in the past month (almost entirely due to a reduction in temporary “other credit extensions” to the FDIC) and a $63B reduction in SOMA holdings (MBS + Tsys/bills) as part of the Fed’s quantitative tightening program.
  • It’s also despite the continued rebuild of the Treasury General Account (TGA) which jumped $179B over the past month. Its rise reflects large movements from the overnight reverse repo facility which fell $336B in the course of a month.
  • At the start of the Treasury’s cash rebuild, ON RRP takeup was nearly $2.2T – it’s since fallen by over $1T to 2 year lows, offsetting the $800B growth in the TGA.
  • However, reserves are almost exactly unchanged, defying expectations that scarcity would develop as cash left banks in favor of bills. The level at which reserves become “scarce” is not known but central estimates are in the $2.4-2.8T range.

Source: Federal Reserve, MNI

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