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Fed’s Shrinkage Problem – Professional Edition

The Fed’s balance sheet shrunk again this week. That makes 8 weeks during which time the Fed’s balance sheet has been shrinking. Apparently this is in preparation for eventually putting all those MBS it’s buying on the books. While the Fed is talking a good game about buying $600 billion in MBS securities, and has already supposedly purchased $124 billion, we can only wonder why they have only actually paid for less than $8 billion of that, and none in the past two weeks.

As a corollary to the Fed’s amazing shrinking balance sheet, outside of one rally day in the bond market and a day of wild gyrations in the stock market on Thursday, the markets remained under pressure for most of the week, as the Fed talked the talk, but didn’t walk the walk.
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