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Date Posted: 10:26:38 3/14/23 Tue
Author: Jasper
Subject: From the fingertips of Taps Coogan

.
Since April of 2022, the Federal Reserve’s balance sheet has shrunk $613.5 billion thanks to quantitative tightening (QT). All other things being equal, that should have sucked a corresponding $613.5 billion of liquidity out of financial markets as private sector buyers make up for the missing demand for Treasuries and Mortgage Back Securities.

However, the Treasury general account, the federal government’s ‘checking account’ at the Fed, started draining down at the same time. Quite remarkably, the Treasury general account has drained down nearly the exact amount of the Fed’s QT program: $611 billion.

The draining of the Treasury’s general account represents federal spending that would otherwise have been financed through new treasury debt issuance but was instead financed out of cash on hand.

In effect, the Treasury’s move to drain the general account instead of issuing new debt has fully offset QT up to this point.

https://thesoundingline.com/treasury-account-drawdown-has-fully-offset-qt/

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