Recent Posts

Markets Climb as Fed Shifts

Kevin Warsh’s Senate Banking Committee confirmation hearing for Federal Reserve Chair on April 21 placed the central bank’s upcoming leadership

April 2026 Monthly Bond Market Review

Recent economic data point to moderating growth alongside rising inflation pressures, as the U.S.-Israeli military campaign against Iran that began

Geopolitics Shape Markets, Fed Watch

Geopolitical headlines continue to materially impact market sentiment, and the latest news flow has been constructive. Israel and Lebanon agreed

March 2026 Monthly Bond Market Review

February economic data continued to reflect the measured disinflationary progression that has characterized conditions throughout the post-pandemic normalization cycle, with

The $4 Trillion Conundrum

An Analysis of the Federal Reserve’s Balance Sheet and Reduction Operations

The severity of the last Great Recession motivated monetary policy makers in the United States and abroad to dig deep into their toolbox to assist their economies in a time of great economic stress. Not only did the Federal Reserve (Fed) lower the fed funds rate to zero, and keep it there for many years, they also increased the size of their balance sheet from $800 billion to $4.5 trillion. By implementing large scale security purchase programs, the Fed anticipated their involvement in the market would lower longer tenor interest rates. The Fed hoped lower longer-term rates would motivate individuals and businesses to take on debt for projects or investments that would stimulate the economy. The Fed’s balance sheet, formally known as Federal Reserve System Open Market Account (SOMA), traditionally held foreign currency reserves and Treasury securities, but as the Fed implemented their plans to help the economy, the balance sheet swelled with agency mortgage backed securities (MBS), agency debentures, and additional Treasury securities.

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