Breaking Down the Balance Sheet 

In March, the Fed announced a further reduction in the balance sheet runoff from $25B a month to $5B a month. The data shows that they have been reducing the pace of runoff but have not yet gotten down to the target $5B a month. The reductions have fallen, but so have the additions. 

The table below provides more detail on the Fed's QT efforts. As shown, the current size of the balance sheet is $6.6T which means it would take over 100 years to fully wind down their balance sheet at the new $5B pace. 

The weekly activity can be seen below. As shown, it's been mostly consistent with big chunks along the way. It is also allowing a range of maturities and products to roll off. 

The chart below shows the balance on detailed items in Loans and also Repos. These were the programs set up in the wake of the SVB collapse early last year. All of the programs have dropped down to zero at this point showing that the emergency measures have come to a close. 

Yields 

Yields have been fluctuating within a band since Sept 2022, ranging mostly between 3.25% and 4.75%. The range of rates has begun to widen in recent months and the yield curve takes on a more normal shape. 

This normalization of the yield curve can be seen in the chart below. The spread between the 2 year and 10 year continues to move up. This does not mean a recession is no longer likely because the inverted yield curve can work on a significant lag. 

The chart below shows the current yield curve, the yield curve one month ago, and one year ago. The long end has moved up while the medium-term bonds have stayed pretty flat for a year. Once the Fed lowers rates in September, it will bring down the very short-term part of the curve. 

The Fed Takes Losses 

When the Fed makes money, it sends it back to the Treasury. This has netted the Treasury close to $100B a year. This can be seen below.