Highlights
In the week ended August 12, the Fed's balance sheet rebounded $11.4 billion for Reserve Bank credit after declining $32.1 billion the prior week. The Fed kept its word from the latest FOMC minutes that it would continue to expand its holdings of Treasuries as the largest increase in the balance sheet was $18.6 billion in securities held outright, of which $16.6 billion were Treasury securities. The Fed also bought $2.1 billion in Federal agency debt. Although over a quarter of the Fed's Reserve Bank Credit outstanding is now mortgage-backed securities, the Fed has eased off recent purchases of these securities which actually edged down marginally the last two weeks.

Usage of emergency lending facilities continues to decline as holdings of the Commercial Paper Funding Facility fell $4.7 billion in the latest week and central bank liquidity swaps dropped $1.1 billion. Other emergency lending facilities generally showed small declines.

Overall, the Fed's balance sheet continues to show huge amounts of liquidity in financial markets with Reserve Bank credit at $2.0 trillion. The Fed is still adding to demand for Treasuries, keeping rates lower than otherwise. But the latest FOMC statement just yesterday indicated that the Fed will no longer increase its purchases of longer-term Treasuries after the end of October. The Fed may start unwinding its balance sheet soon thereafter.