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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FED
As noted, total Fed holdings fell to a 2-year low this week, in large part due to the drop in “other credit extensions”.
- Checking up on developments in the SOMA portfolio as a whole, the last 4 weeks have seen a total of just over $65B in rolloff, including $35B Tsys, $12B in Bills, and just under $19B in MBS/Agencies. That’s still the driving force between the overall reduction in the Fed’s balance sheet, with emergency lending/liquidity facilities to banks down $52B.
- SOMA’s size has contracted by $1.045T since QT started in June 2022, though as that’s been unevenly and disproportionately distributed: coupon Tsys have made up 69% of asset runoff but compose 57% of holdings; MBS meanwhile make up 20% of runoff but 34% of holdings. (The monthly Tsy runoff is $60B/month and MBS $35B).
- That dynamic is unlikely to change any time soon, with high market mortgage rates leading prepayments to collapse (refinancing levels are at the lowest of the 2000s), leaving MBS on the Fed’s balance sheet with limited passive runoff.
Source: Federal Reserve, MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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