Friday, June 24, 2011

"Other Fed Assets" Hits Record $133 Billion, More Than The GDP Of Kuwait

That the Fed's balance has hit another record high (and will do so for at least two more weeks) should come as a surprise to nobody. After all, when something is at a record and grows relentlessly, it is pretty safe to say next week will be another record. That said, there were several curious observations in this week's H.4.1 update. First and foremost is that the "other Fed assets" category just hit an all time high of $132.7 billion. This category, which is now larger than the GDP of Kuwait, is apparently so comprehensible and transparent to the hoards of FOMC precleared journalists, that for the second meeting in a row, nobody feels like asking a question about just what is contained in this asset class. We also hope that nobody attempts a correlation between the Other Fed Assets class and the S&P. Another notable thing is the amount of MBS prepays continues to drop and has slowed down to a trickle. Elsewhere, the Fed's excess reserves are once again back to chasing Bernanke's expanding asset class, with over $40 billion more in cumulative asset expansion since the start of QE Lite, than excess reserves. Lastly, looking at the Fed's custodial treasury holdings, there was another small decline in USTs held in proxy by the Fed: the first decline in 4 weeks, since the May 25 second biggest historic drop. Aside from these, it was smooth sailing for the Fed, where the average maturity of SOMA holdings declined just modestly from 61.6 to 61.5 months.