Fed Buys $587 Billion In Bonds In Past Week, 2.7% Of GDP, Just As Foreign Central Banks Start To Liquidate

Having moved from “Not QE” (or QE4 as it was correctly called), to the $750BN QE5 which came and went with the blink of an eye, to the Fed’s open-ended and unlimited QEnfinity in the span of one week, the full “shock and awe” of the Fed’s money printer is now on full display, and in just the past week, from March 19 to March 25, the Fed has purchased $587BN in securities ($375BN in TSYs, $212BN in MBS), or roughly 2.7% of the $21.4TN in US GDP.

This means that as of Wednesday close, when accounting for last week’s repo operations, the Fed’s balance sheet has increased by roughly $650BN, bringing it to just over $5.3 trillion, an increase of $1.2 trillion in the past two week, or roughly 5.6% of US GDP.

Some more scary statistics: if the Fed continues QE at the current pace of $625 billion per week, the Fed’s balance sheet will hit $10 trillion by June, or just below 50% of US GDP. Even assuming the Fed eases back of the gas pedal, its balance sheet is almost certain to hit $7 trillion by June.
Which is hardly an accident: one look at the Treasury securities held in custody at the Fed shows that the past two weeks have seen a whopping $50BN in foreign central bank sales, a 1.7% drop which was the highest in six years since Russia pulled over $100BN in TSYs from the Fed at the start of the Crimean war in 2014.

As Bloomberg observes, the selling may have contributed to record volatility in the Treasury market and prompted the Fed’s intervention. More importantly, it also means that the biggest buyer of US Treasurys in the past decade, foreign official institutions (i.e., central banks and reserve managers) are now sellers, so now the U.S. government needs private investors …
Read further at ZeroHedge

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