From crisis to crisis, and even when there is no crisis.

Through Wolf Richter for LOUP STREET.

The Fed continued to increase its pile of Treasuries at a steady pace, thereby monetizing this portion of the US government debt. It also added Mortgage Backed Securities (MBS) to its stack. But five of its Special Purpose Vehicles (SPVs), designed to bail out the business credit market, have expired and are stranded. Its repo positions were unwound at the end of June and remain at zero. Its foreign central bank liquidity swaps, designed to provide dollars to other central banks, have expired and fallen into disuse, except with the Swiss National Bank.

In total, the assets of the Fed weekly balance sheet until Wednesday, February 24, hit a new record high of $ 7.59 trillion.

This is a bewildering amount of QE designed to suppress long-term Treasury yields and mortgage rates – which nonetheless rose and sent whiners on Wall Street screaming for more QE:

For your amusement, here’s the long-term view of how far the Fed has pushed its strategy to bail out and enrich asset holders, treating the largest asset holders to the greatest enrichment, and creating in the shortest possible time. biggest wealth disparity ever, crisis or no crisis:

Purchases of Treasury securities do the heavy lifting, reaching $ 4.84 trillion.

The Fed has added about $ 84 billion a month in treasury securities since the huge spring frenzy. Since the start of March, its holdings have nearly doubled, swelling from $ 2.34 trillion to $ 4.84 trillion:

MBS zigzags higher at $ 2.18 trillion.

Mortgage Backed Securities differ from regular bonds in that all MBS holders receive principal payments transferred when the underlying mortgages are paid off, after the home is sold or the mortgage refinanced. The Fed buys large amounts of MBS in the “To Be Announced” (TBA) market, to replace principal pass-through payments, and then to increase its balance. Since transactions in the TBA market take months to settle, the timing differs from the principal pass-through payments, which creates zig-zags in the chart. The Fed also sells outright MBS:

Pension agreements (Rest) at zero:

The Fed continues to offer pensions but has raised rates where there are better offers, and no one accepts the Fed’s offers:

Central bank liquidity swaps are almost zero.

The Fed offers dollars to a select group of 14 other central banks through its “central bank liquidity swaps”, in exchange for their currency. Almost all of these swaps matured and were unwound. Only $ 6.8 billion was still in circulation, more than half of which came from the tiny Swiss National Bank:

SPV on Ice, at $ 140 billion.

Special Purpose Vehicles (SPVs) are legal entities (LLCs) that the Fed has created and owned to enable it to purchase assets that it is not authorized to purchase otherwise. Equity financing is provided by the Treasury Department, which would incur the first loss on these assets. The Fed lends to SPVs, and shows these loans and Treasury equity funding in those SPV accounts.

On December 31, five of the SPVs expired – PMCCF, CCF, MLF, MSLP and TALF – and they are now on the ice. This completely ended the corporate bond buying program. But the Fed had already stopped buying corporate bond ETFs in July and was only buying a handful of corporate bonds anyway. The total amounts of the combined SPVs remain at around $ 140 billion, including $ 52 billion in PPP loans that the Fed bought from the banks:

Despite massive purchases of Treasuries by the Fed, the 10-year Treasury yield climbed to 1.52%:

Creating worrying booms in highly leveraged hedge fund circles, the 10-year yield climbed to 1.52% on Thursday, the highest in just over a year, and nearly tripled since August, despite the Fed’s massive QE. Wall Street is not having fun:

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