Fed balance sheet soars past $7 trillion

The Federal Reserve reported assets of $7.04 trillion on May 20 in its attempt to support capital markets and manage interest rates. The figure represents a $2.9 trillion increase since Jan. 1, or a 68% jump. Interest rates responded accordingly to the new demand. The 10-year Treasury yield stood at 0.68% on the Fed's reporting date, currently 0.7%, while the yield-to-worst on 10-year corporates was 2.54%, now about 2.46%.

Concern over the move pushing some Treasury rates below zero arose, particularly as the 2-year Treasury bond yield fell below 0.2% in early May, but rates found some support at that level and have remained there nearly constant.

The bulk of the asset purchases have been in Treasury and mortgage-backed securities. The Fed announced, however, that it would also begin purchasing corporate bond ETFs to the tune of $250 million over the course of the summer. That action, targeted at adding further liquidity to the market, would still represent only 3% of the total assets.

The Fed took similar action in the throes of the global financial crisis. Balance sheet assets grew to more than $2.5 trillion in early 2009 from $905 billion the previous September.