Federal Reserve Balance Sheet -- Shrinking On Its Own ~ Steve Blitz Morning Notes
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Friday, July 24, 2009

Federal Reserve Balance Sheet -- Shrinking On Its Own

Joseph Abate at Barclay Capital does a great job following the Fed balance sheet and its implications for money market rates. This week the self-liquidation that Bernanke talked about in his testimony contracted the Fed's reserve balances by nearly $30 billion. Not a lot of money when we are talking trillions, but those billions do eventually add up.

From Mr. Abate's Weekly Federal Reserve Balance Sheet Report --

Despite the settlement of nearly $30bn in liquid assets this week, the Federal Reserve’s overall balance sheet contracted with reserve balances falling by nearly $30bn.
  • The various Federal Reserve liquidity programs are rapidly disappearing – and most could be gone by the end of summer.
  • Declines in the CP-FF may slow in coming weeks as the paper left in the program remains challenged.
  • Detailed monthly data from the Federal Reserve indicate that borrowing from these facilities remains highll concentrated among just a handful of banks and issuers.
  • The recent contraction in bank reserves has not pushed the effective funds rate higher.

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