Picture du Jour: The Fed’s ballooning balance sheet

 EmailPrint This Post Print This Post

The following from Ian Mathias, co-author of the 5 Min. Forecast: “One good reason to guard your finances in 2010: The Federal Reserve’s balance sheet has quietly ballooned back to near-record highs. The Fed announced yesterday that its balance sheet expanded to $2.22 trillion last week, its grossest level in nearly a year and just a hair from an all time high. Hmmm … if Mr. Bernanke assures us the recession is ‘very likely over,’ then why is the Fed balance sheet in crisis mode? What are they worried about?

5min-forecast

Source: The 5 Min. Forecast, December 29, 2009.

“The Federal Reserve went from a non-existent player in the mortgage backed security market a year ago to owning $904 billion of the stuff today. The ‘private’ bank has clearly moved its aim from the financial sector to housing, loading up on MBS, debt spilling out of Fannie Mae and Freddie Mac and Treasury bonds (a handy way to suppress mortgage rates),” said Mathias.

The chart below shows monthly data for the ten-year Treasury Note yield since 1998 and conveys an important message when considering the two momentum-type oscillators at the bottom (ROC and MACD). The ROC reversed course (crossing the zero line) about two months ago for the first time since a buy signal was given at the beginning of 2007 and now indicates a primary sell signal. The MACD provided a similar indication seven months ago. Although oversold in the near term, with massive issuance looming and inflationary pressures building government bonds are not the place to be in 2010.

tnx3112

Source: StockCharts.com

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
Anticipating The Rate Hike
Rising Interst Rates Historically A Positive For Equity Returns
You can't really see it on this chart so you'll have to trust me
Read more on Federal Reserve at Wikinvest
OverSeas Radio Network

1 comment to Picture du Jour: The Fed’s ballooning balance sheet

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

  

  

  

Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones


One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

December 2009
MTWTFSS
« Nov Jan »
 123456
78910111213
14151617181920
21222324252627
28293031 

Feed the Bull