Why Investors Care
This report typically has not garnered much market attention since Fed policy has been tracked through changes in the fed funds target rate. But with the Fed cutting the fed funds rate to essentially zero in December 2008, markets began to look for other ways (other than rate changes) for viewing the progress and impact of quantitative easing - and tracking the Fed's balance sheet became one of numerous methods of seeing how the Fed's further injections of liquidity were filtering through the economy. Also, the detail of the balance sheet can indicate whether institutions using specific programs are improving as suggested by less reliance on Fed loans.
This indicator has had low importance during the Fed's publicly announced interest rate targeting period but has gained a little more stature during quantitative easing since the fed funds rate has been at essentially zero.
Markets focus on weekly changes for factors supplying reserves with the key measure being Reserve Bank credit. Reserve Bank credit reflects the key factors supplying reserves in the banking system and currently includes such diverse items as U.S. Treasury securities, federal agency debt securities (such as Fannie Mae and Freddie Mac), mortgage-backed securities, repurchase agreements, term auction credit, primary credit (discount window), secondary credit, seasonal credit, primary dealer credit, asset-backed commercial paper money market, credit extended to AIG, Term Asset-Backed Securities Loan Facility, net portfolio holdings of Commercial Paper Funding Facility LLC, net portfolio holdings of LLCs funded through the Money Market Investor Funding Facility, net portfolio holdings of Maiden Lane LLC, Maiden Lane II LLC & Maiden Lane III LLC, float, central bank liquidity swaps, and "other" Federal Reserve asset. Reserve Bank credit is the same as total factors supplying reserve funds other than exclusions for gold stock, special drawing rights, and Treasury currency outstanding.
Changes in Reserve Bank credit give a broad picture of reserve injections. But markets also track the detail of the various programs - such as holdings of U.S. Treasury securities or federal agency debt securities or primary credit (discount window) to see if certain sectors are having less need for Fed help or if the Fed is getting more involved.
Federal Reserve Board of Governors.
Data are for daily averages for the week ending on Wednesday and also just for the day of Wednesday of the week of the release (week ending April 22 and day of April 22, 2009 released April 23, 2009).