Bonds News

UPDATE 2-U.S. Fed's balance sheet biggest since December

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NEW YORK, Nov 19 (Reuters) - The U.S. Federal Reserve’s balance sheet swelled in the latest week to the biggest in almost a year on increases in agency and mortgage-backed securities holdings, Fed data showed on Thursday.

The Fed’s balance sheet liabilities -- a broad gauge of its lending to the financial system -- expanded to $2.192 trillion on Wednesday from $2.117 trillion a week ago.

That was the highest since the $2.248 trillion level of Dec. 31, 2008 but below the record $2.295 trillion set on Dec. 17, 2008.

The Fed’s balance sheet has more than doubled due to its massive financing aimed to help the financial system and the overall economy in the aftermath of last year’s credit crisis. The U.S. central bank took unprecedented steps, including purchases of government and mortgage-related securities.

The Fed’s holding of mortgage-backed securities increased to $847.04 billion on Wednesday from $775.57 billion a week earlier, while its agency debt ownership climbed to $153.05 billion from $149.67 billion.

The Fed has said it will buy $1.25 trillion worth of MBS and $175 billion in bonds issued by Fannie Mae FNM.N, Freddie Mac FRE.N and the Federal Home Loan Bank System. These purchases are cornerstones of its quantitative easing efforts aimed at holding down mortgage costs and energizing the battered housing industry.

The U.S. central bank’s other financing activities were mixed compared with a week ago.

Overnight direct loans to banks via the Fed’s discount window averaged $108.25 billion per day in the latest week, compared with $108.22 billion a day in the prior week.

Primary credit borrowings averaged $19.79 billion in the week ended Nov 18, down $22.61 billion the previous week.

The Fed’s liquidity swap lines with foreign central banks to provide dollars averaged $28.28 billion per day in the latest week, down from $29.09 billion per day in the prior week’s average, according to Fed data.

The Fed’s Commercial Paper Funding Facility assets totaled $15.04 billion on Wednesday, up from the prior week’s $14.30 billion.

The central bank’s TALF LLC, a vehicle created in connection with its Term Asset-Backed Securities Loan Facility (TALF), was worth $231 million on Wednesday.

The TALF program aims to jump-start the securitization that was battered by last year’s credit crisis. TALF was worth $43.6 billion on Wednesday, compared with $43.84 billion a week ago.

TALF LLC buys asset-backed securities created from loans made by TALF. This finance vehicle is funded by fees and income earned from its investments.

Reporting by Richard Leong; Editing by Dan Grebler