Fed Dashboard Additions
For the economic wonks, the customized Federal Reserve of St. Louis dashboards on this site have served to keep track of economic trends in the labor market, credit and commodities, Some new charts have been added recently to better sync with our post pandemic concerns. Charts for diesel and "regular" retail prices have been added, for example, and the chart below will track the Fed's progress in Quantitative Tightening, as it unwinds it's positions initiated in the COVID era.
April 2022 marked the peak in Fed Asset holdings.
The RED line is for Treasuries and the GREEN line is for Mortgage Backed Securities. The mortgage backed paper poses a bit of a problem for the Fed at this juncture. It once held about 25% of the entire MBS market, and the mortgages can simply roll off with each home sale that extinguishes a lien, or get slowly amortized with each monthly payment. The problem is that about 60% of mortgages held are in a sub 4% rate zone, and no doubt you've all heard about the lock up this has created in the market. Few want to let go of such advantageous financing, and with current mortgage rates over 200 basis points higher, the "trade up" business in real estate has practically vanished. Nor can the Fed sell these without triggering a loss.
With most of the Fed hiking behind us, no doubt these issues will iron themselves out in time, but for now, it's going to be a slog. The Fed has far more control of its Treasury holdings, especially since most of the holdings are shorter dated, and that partially helps explain the sharper decline for that paper.
These figures are updated weekly, for those who can't stand the suspense.