November QT

TLDR

SOMA Holdings will rolloff by ~78.55b in November.

Approximately Dropping:

·        11/16 : 42b

·        11/23 :  5b

·        11/30 :  31.55b

*Note for new readers – If this is your first time reading my posts on QT and are interested in the mechanics behind QT and how I reach these projections. Please see my earlier posts starting with Reverse Engineering QT on July 29.

Hello!

QT is quite vanilla in November. Coupon (notes, bonds) UST maturities exceed 60b so there will be no bill runoff this month. Additionally, all the lagging MBS settlement noise is fully in the rear view mirror meaning B/S reduction from maturing MBS will equal the amount of MBS payments/prepayments made to the Fed.  Just like last month, weekly B/S impact along with day of liquidity impact are below.

NovemberMBS Payments

MBS payments for the month should be ~18.55b. This payment projection is based on FNMA and FHLMC prepayment rates being ~82.4% for October vs. September. Accordingly, we should see a similar drop in MBS payments.

·        UMBS: 14,600,000,000 (~last month) * .824 = 12,000,000,000

·        GNMA I + GOLD : 1,888,241,900 (last month) * .824 = ~ 1,550,000,000

·        GNMA II: 6,000,000,000 (~last month)  *.824 = ~5,000,000,000

·        Total Projected Oct MBS: ~18,550,000,000

November UST Rolloff

·        Total notes/bonds: 109,972,183,700

·        Total FRNS/TIPS: 0

·        Total Coupons: 109,972,183,700

Since Coupons maturing exceed 60b, the Fed will fully reinvest their bill maturities in November.

Between the mid month and end month maturities, the Fed rolls off an amount proportional to the total amount maturing. Accordingly, since 60b will be rolled off out of a total ~110b for the month. ~54.56% (60/109.97) of the amounts maturing on 11/15 and 11/30 will roll off.

CMBS

The CMBS payments were closer to a 1/3 on the 15th, 2/3 on the 25th last month, so we will roll with that this month. The total of 45,000,000,000 was pretty close last month so we will go with it again. These CMBS amounts really are more or less a rounding error to the total SOMA Holdings.

QT Liquidity Impact by Date in November

*Note that the GNMA II MBS payment due on Sunday the 20th is instead received the next business day, Monday the 21st.

Weekly Projections through the end of November

11/16/22 SOMA Domestic Security Holdings projection

11/23/22 SOMA Domestic Security Holdings projection

11/30/22 SOMA Domestic Security Holdings projection

That should do it for QT in November. As always, thanks for reading.

Best,

John