Fed balance sheet closing in on 35% of GDP

Still smaller than in many regions

Chart of the Day

The Fed confirmed yesterday that its balance sheet reached a new all-time high of $7.44 trillion last week, equivalent to 34.5% of US GDP. That means the Fed’s balance sheet is smaller than the ECB’s, at 60% of GDP, and much smaller than those of the SNB or BoJ where the balance sheets are well over 100% of GDP.

Macro

In the case of the SNB, that’s because the central bank owns a huge amount of foreign assets, split roughly 80/20 between bonds and equities.

Not all of the 130% of GDP in assets owned by the BoJ are government debt, but the amount owned means the government there essentially owes a big share of its massive debt burden to itself.

The data yesterday showed initial jobless claims were higher than expected last week.

In Mexico, the central bank cut rates again yesterday, to 4%. Many think that is the last rate cut from the bank.

That would still leave its inflation-adjusted policy rate in positive territory, so much higher than elsewhere in the world.

Markets

After rising sharply due to the downfall of the government, Italian bond yields have since fallen further toward those elsewhere in Europe since Mario Draghi was asked to be prime minister.

The long part of the yield curves have been rising across the advanced economies this month.

US long-term inflation-linked swaps have been volatile lately but ultimately remain higher than at any point since 2018.

Finally, bitcoin gained some ground on ethereum yesterday and is approaching the $50,000 mark.

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