Fed Balance Sheet QT: -$37 Billion in November, -$2.43 Trillion from Peak, to $6.54 Trillion

Core Insights - The Federal Reserve's quantitative tightening (QT) has concluded, with a total asset reduction of $2.43 trillion over three years and five months, representing a 27% decrease from its peak [2] - The Fed's balance sheet decreased by $37 billion in November, reaching $6.53 trillion, with a significant shift in asset composition expected as Mortgage-Backed Securities (MBS) are replaced by Treasury bills [1][4] QT and Asset Composition - The Fed's MBS holdings decreased by $16 billion in November, totaling $2.05 trillion, a 25% decline from the peak [4] - Treasury securities saw a reduction of $4 billion in November, with a total of $4.19 trillion, marking a 27.4% decrease from the peak in June 2022 [8] - The Fed plans to continue reducing MBS until they are fully off the balance sheet, while increasing T-bills, which currently stand at $195 billion [4][8] Repo Market Dynamics - The Standing Repo Facility (SRF) was utilized by banks to manage liquidity pressures, with a peak balance of $50 billion at the end of October, dropping back to zero shortly after [11][13] - The Fed expressed disappointment in banks for underutilizing the SRF, which contributed to spikes in repo market rates [14] - The SRF successfully mitigated liquidity pressures in the repo market, preventing a repeat of the 2019 blowout scenario [20] Financial Metrics and Economic Indicators - The Fed's assets as a percentage of GDP fell to 21.4% in November, indicating a potential further decline if the balance sheet remains flat while the economy grows [28] - The Treasury General Account (TGA) currently holds $908 billion, which has permanently increased the Fed's balance sheet size since the Financial Crisis [27]