by Peter Schiff, Schiff Gold:
The following analysis breaks down the Fed balance sheet in detail. It shows different parts of the balance sheet and how those amounts have changed. It also shows historical interest rate trends.
Breaking Down the Balance Sheet
Back in May, the Fed announced a reduction in QT from $95B to $60B. The data shows this change took effect immediately in June as the Fed balance sheet shrunk by $55B or less in the last three months.
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Figure: 1 Monthly Change by Instrument
The table below provides more detail on the Fed’s QT efforts.
Figure: 2 Balance Sheet Breakdown
The weekly activity can be seen below. It is difficult to tell if the Fed is rotating the securities on the balance sheet or simply re-categorizing bonds as they get closer to maturity.
Figure: 3 Fed Balance Sheet Weekly Changes
The chart below shows the balance on detailed items in Loans and also Repos. These were the programs set up in the wake of the SVB collapse last year. Three of the four programs have dropped close to zero, but the Bank Term Funding Program (BTFP) remains elevated. The BTFP was the program that allowed banks to value their Treasury assets at par for up to one year. That amount has started dropping some after the 1 year period expired, but has remained close to $100B since, showing not all the stress has been removed from the banking system.
Figure: 4 Loan Details
Yields
Yields have fallen across the board in recent weeks.
Figure: 5 Interest Rates Across Maturities
The spread between the 2-year and 10-year has finally reached parity for the first time since July 2022.
Figure: 6 Tracking Yield Curve Inversion
The chart below shows the current yield curve, the yield curve one month ago, and one year ago. It is clear to see the curve has moved down across the board in the most recent month.
