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News Link • Economy - Economics USA

A J-Hole Surprise... QE Is Back!

•, by Chris Hamilton

Quantitative Tightening is over, but is outright QE back???

Ongoing "direct monetization" continues, with un-matched declines in Excess Reserves versus Fed held Treasury's and MBS.

Interesting that this week, for the first time since QE ended way back in late 2014, Federal Reserve holdings of Treasury bonds rose (yellow columns, below).  The $8 billion increase is the first seen since QE ended almost 5 years ago and comes after QT (quantitative tightening) had been decelerating since mid 2019.  However, the outright increase in Treasury holdings is still a bit of shocker.  Can't say if this was a one off... but this deserves a bit more attention.

So what exactly was the Fed buying?  Seven to ten year Treasury's!  The chart below shows the Fed's mid duration holdings (red line) and the weekly change in those holdings (blue columns).  The purchasing this week was only bested by a single week in 2011...when the Fed was feverishly running its QE program?!?

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