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On the radar: August sees conclusion of reduction in balance sheet to about $3.6 trillion

On July 31, the FOMC announced that it was winding up reductions in its holdings of securities — Treasurys, Agency MBS, and Agencys. The final size of the balance sheet is now about $3.6 trillion, two years after the start of the normalization program.

Unless the FOMC decides on another round of asset purchases — so-called “quantitative easing” or “QE” — the size of the balance should hold more or less at $3.6 trillion going forward. What will slowly change is the composition. Up to $20 billion a month in maturing Agency MBS is going to be reinvested in Treasurys across a spectrum of maturities that will eventually roughly match the maturity of all outstanding Treasury bills, notes, and bonds.

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