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The numbers: The Federal Reserve’s balance sheet expanded to a record $6.70 trillion in the week ended April 29, up from $6.62 trillion in the prior week, the central bank said Thursday.
What happened: The Fed has been slowing down the pace of its asset purchases as markets return to normal. Its assets grew by $82.8 billion in the past week, down from the prior increase of $205 billion.
The central bank’s holding of Treasurys rose by around $62.1 billion this week to $3.97 trillion, while its holdings of mortgage-backed bonds fell by $17.8 billion to $1.60 trillion.
Banks outside the U.S. continued to show demand for dollars. Liquidity swaps lending greenbacks to other central banks rose by $29.2 billion to $439 billion.
An emergency lending facility allowing the Fed to snap up short-term debt from highly rated corporations, or commercial paper, saw minimal use. The Fed’s holdings of commercial paper increased by $640 million to $3.34 billion.
Big picture: Tiffany Wilding, chief U.S. economist for Pimco, projects the Fed’s balance sheet to hit a peak of around $8.5 trillion, up from the $4.2 trillion before the pandemic.
“As markets pulled away from the brink of collapse, the Fed started to dial back the weekly pace of purchases in early April. Over the next few weeks, we think the Fed will likely continue to taper toward a ‘steady state’ level, which it will then maintain at least through the fourth quarter of this year, by our estimates,” she said.
Market reaction: The yield on the 10-year Treasury note TMUBMUSD10Y, 0.644% declined slightly on Thursday to yield 0.619%.
