Although Fed’s holdings of Treasury bills in the week ended October 31 is miniscule at $40.3 billion compared to the $1.977 trillion of nominal notes and bonds or $121.0 billion of TIPS, or $1.448 trillion in Agency MBS, it is still a sizable increase from the $6.0 billion at end of the October 2 week. Gains will be steady through the second quarter 2020 as bill purchases will continue at least through then.
For roughly the month of October, the size of the Fed’s securities holding was up $6.5 billion from the September holdings. This is the first increase since the Fed began the process of balance sheet normalization two years ago. Holdings of Agencys and Agency MBS will continue to decline as principle is reinvested back into Treasurys. The Fed intends to eventually get back to a Treasurys-only portfolio. However, it will take a while to get there.
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