Fed balance sheet below $7T, repo drops to zero

The US Federal Reserve’s holdings of bonds and other assets shrank for a fourth straight week, sliding below $7 trillion, and use of one key emergency liquidity measure dropped to zero in the latest sign that financial stresses that erupted early in the coronavirus pandemic have eased.

The Fed’s total balance sheet size declined by about $88 billion to $6.97 trillion as of July 8 versus $7.06 trillion a week earlier. It was the largest weekly drop in more than 11 years, and the main driver was the balance of outstanding repurchase agreements — or repos — which fell to zero from $61.2 billion a week earlier.