Blow up mattress target1/13/2024 ![]() ![]() But trades in the TBA market take months to settle, and timing differences create the zig-zags. The Fed buys MBS in the “To Be Announced” (TBA) market to replace the pass-through principal payments and to increase its balance. ![]() Holders of mortgage-backed securities receive pass-through principal payments as the underlying mortgages are paid down or are paid off. MBS zigzag higher, but for the week drop by $50 billion to $2.18 trillion. Purchases of Treasury securities purr along, $4.94 trillion.Īfter the initial blast a year ago, the Fed has continued to add around $80 billion a month in Treasury securities to its balance sheet, bringing the 13-month total addition to $2.47 trillion, which more than doubled its Treasury holdings over the period to $4.94 trillion: To put that $30 billion dip this week into perspective, here is the detailed view of the Fed’s total assets since early 2020: Bond prices fall as yields rise, and the crybabies on Wall Street want the Fed to do something about those rising long-term yields and the bloodbath they have created in the prices of long-term Treasury securities and high-grade corporate bonds.īut instead, the Fed has said in monotonous uniformity that rising long-term yields despite $120 billion of QE a month are a welcome sign of rising inflation expectations and a growing economy: ![]() Mortgage rates started rising in early January. The 10-year Treasury has more than tripled since then and closed today at 1.72%. But long-term Treasury yields started rising last summer. One of the purposes of QE is to force down long-term interest rates and long-term mortgage rates. Over the past 13 months of this miracle money-printing show, the Fed has added $3.5 trillion in assets to its balance sheet: What the Fed is still buying are large amounts of Treasury securities and residential MBS, though no one can figure out why the Fed is still buying them, given the crazy Everything Mania in the markets.īut for the week, total assets on the Fed’s weekly balance sheet through Wednesday, March 31, fell by $31 billion from the record level in the prior week, to $7.69 trillion. And foreign central bank dollar swaps have nearly zeroed out. Its repos faded into nothing last summer. The Fed has shut down or put on ice nearly the entire alphabet soup of bailout programs designed to prop up the markets during their tantrum a year ago, including the Special Purpose Vehicles (SPVs) that bought corporate bonds, corporate bond ETFs, commercial mortgage-backed securities, asset-backed securities, municipal bonds, etc. But long-term Treasury yields have surged, to the great consternation of our Wall Street Crybabies.
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