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Comment: Fed’s balance sheet securities holdings creep toward $6 trillion in June 10 week average

The Federal Reserve bought $20.8 billion in Treasury notes and bonds and $0.3 billion in Agency MBS in the week ended June 10 averages. This brought the total for securities held outright to $5.981 trillion. The pace of securities purchases has steadily faded in recent weeks as markets have needed less support from these. However, as Chair Jerome Powell noted in his press briefing on June 10, the Fed is prepared to pick up the pace again if necessary.

After month-end in the prior week, the use of repo and reverse repos has scaled back as short-term financing needs eased. Repos were down $15.4 billion to $184.3 billion and reverse reposes were down $11.5 billion to $241.6 billion.

Discount window loans have continued to fall since the peak of $41.0 billion in the April 15 week, possibly due to the timing of tax payments. In any case, the level has fallen to $9.3 billion, the lowest since the onset of problems in late March in financial markets with the arrival of the COVID-19 pandemic and indications that economic activity would be severely affected.

The use of central bank swap lines was substantially lower in the June 10 data, down to $31.2 billion after $447.2 billion in the prior week. Problems with dollar funding abroad seem to be less.

The use of the Fed’s credit facilities wasn’t that much higher, on net. However, it is notable that the PPP facility was up $3.0 billion to $56.3 billion. Its use has brought a sizable number of workers back on to payrolls, and may bring even more, at least until the money runs out.

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