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Comment: Fed’s balance sheet rises, share of Treasurys increasing, Agency MBS decreasing

For a second month in a row — and essentially for the foreseeable future — the Fed’s holdings of securities were up due to the purchase of Treasury bills. Since the decision in early October to regularly purchase bills at least through the end of the second quarter 2020, were up roughly $30.5 billion in October and $54.4 billion in November. As of November 27, the Fed held about $94.7 billion in bills on their balance sheet.

Holdings of Treasury notes and bonds were up about $12.1 billion over the four weeks ended November 27. TIPS were up $3.4 billion and inflation compensation was up $0.475 billion. The increases are by-and-large the result of Agency MBS holdings maturing or principal payments which were down about $16.0 billion. Holdings of Agencys remained unchanged at $2.4 billion. The Fed is carefully returning its balance sheet to all Treasurys, but that will take some time. With the end of November data, about 61% of the holdings are in Treasurys, of which about 3% is in bills.

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