View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

A Return to Operating with Abundant Reserves
Remarks before the Money Marketeers of New York University

Lorie Logan
December 1, 2020
The views presented here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System

Figure 1: Assets of the Federal Reserve
$ Billion
8,000
Other Assets**
7,000

Repurchase Agreements, Swaps, Credit, and Liquidity Facilities*
Agency Debt

6,000

Agency MBS
Treasuries

5,000
4,000
3,000
2,000
1,000
0
Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19

* Includes repurchase agreements, central bank liquidity swaps, primary and secondary credit, Primary Dealer Credit Facility, Money Market
Mutual Fund Liquidity Facility, Paycheck Protection Program Liquidity Facility, and net portfolio holdings of the Commercial Paper Funding
Facility, Corporate Credit Facilities, Main Street Lending Program, Municipal Liquidity Facility and Term Asset-backed Securities Loan Facility
** Includes gold certificates, special drawing rights, coin; foreign currency denominated assets, bank premises, unamortized premiums and
discounts on securities held outright, accrued interest, net portfolio holdings of the Maiden Lane LLC, and other accounts receivables.
Source: Federal Reserve Board H.4.1 Statistical Release

2

Figure 2: Liabilities of the Federal Reserve
$ Billion
8,000
Reserves
7,000

FR Notes (Currency)
Treasury General Account (TGA)

6,000

Other Liabilities and Capital
Overnight Reverse Repurchase Agreeements*

5,000
4,000
3,000
2,000
1,000
0
Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

* Includes small volumes of term reverse repurchase agreements exercises in 2015
Source: Federal Reserve Board H.4.1 Statistical Release

Jan-17

Jan-19

3

Figure 3: Stylized Bank Demand for Reserves
Pre-Crisis Framework

Ample-Reserves
Regime Framework*

* The ample-reserves regime framework reflects a much broader span of potential reserve levels and is not drawn to scale relative to the precrisis graphic.

4

Figure 4: Fed Funds – IOER Spread
Bps
25

$ Billion
3,500
Reserves (RHS)

20

Fed funds-IOER* (LHS)
3,000

15
2,500

10
5

2,000

0
1,500

-5
-10

1,000

-15
500

-20
-25
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

* Effective federal funds rate, excludes month- and quarter-ends
Source: Bloomberg, Federal Reserve Board, FR2900

Jan-17

Jan-18

Jan-19

Jan-20

0

5

Figure 5: Fed Funds – IOER Spread vs.
Total Reserves
Fed Funds – IOER*
(Percent)

2010-2013

2014-2015

2016-2019

Q1 2020

2020 ex Q1

0.20
0.15
0.10
0.05
0.00
-0.05
-0.10
-0.15
-0.20
-0.25

0

500

1,000

1,500
2,000
Total Reserves ($ Billion)

* Volume-weighted average federal funds rate, excludes month- and quarter-ends
Source: FRED, FRBNY, Federal Reserve Board, FR2420, FR2900

2,500

3,000

3,500
6

Figure 6: Reserves by Bank Type
$ Trillion
4.0
Branches of FBOs

US GSIBs

Other Domestic banks

Other

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan-07

Jan-09

Jan-11

Source: Federal Reserve Board, FR2900

Jan-13

Jan-15

Jan-17

Jan-19

7

Figure 7: Cumulative Net Bill Issuance
$ Billion
3,800
2017

3,300

2018

2019

2020

2,800
2,300
1,800
1,300
800
300
-200

1

Source: FRBNY

31

61

91
121
151
Business Days in the Year

181

211

241

8

Figure 8: Senior Financial Officer Survey - Banks’
Expectations for their Reserve Balances in Q4
Percent of
Respondents
60

Domestic

50

FBO

“By how much do you expect
your institution’s average endof-day reserve level in
December 2020 to change
relative to August 2020?”

40

30

20

10

0

V. An increase of VI. An increase of
IV. Stable
I. A decrease of II. A decrease of III. A decrease of
greater than 50% between 26% and between 6% and reserves (plus or between 6% and between 26% and
50%
25%
minus 5%)
25%
50%

Source: Senior Financial Officer Survey Fall 2020

9

Figure 9: Policy Target Range and Administered Rates
Bps
350

Technical adjustments
to administered rates

Target Range
ON RRP

300

IOER
EFFR
Primary Credit Rate

250

200

150

100

50

0
Jan-18

Jul-18

Jan-19

Jul-19

Jan-20

Jul-20

* The Desk also conducts daily, large-scale overnight repo operations, currently at a fixed rate of five basis points above IOER
Source: FRED, FRBNY

10