Key Insights
The Federal Reserve's balance sheet has decreased by about $2.3 trillion since its 2022 peak, with total assets now around $6.7 trillion.
The reduction is mainly due to the runoff of Treasury securities and agency mortgage-backed securities, with the Fed ending the runoff on December 1, 2025.
Post-QT, the Fed has increased Treasury holdings by $275 billion and reduced agency mortgage-backed securities by $191 billion over the past year.
AI Analysis
The Federal Reserve's ongoing balance sheet reduction is likely to continue influencing financial markets, particularly in the Treasury and mortgage-b...
Market Outlook
Short-Term
In the short term, the Fed's balance sheet reduction may lead to increased yields in the Treasury market due to reduced demand from the Fed. This could also impact liquidity conditions, potentially affecting short-term interest rates and borrowing costs for financial institutions.
Long-Term
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