US bank reserves fall, providing basis for the Fed to end QT

U.S. banking system reserves, a key factor in the Federal Reserve's decision to continue shrinking its balance sheet, fell by approximately $59 billion to $2.93 trillion in the week ending October 22, according to data released by the Fed on Thursday. This was the lowest level since the week of January 1. The U.S. Treasury increased debt issuance to rebuild its cash balance following the July debt ceiling increase, which drained liquidity from other liabilities on the Fed's books, such as its overnight reverse repurchase agreement (ORA) facility and bank reserves. With the so-called ON-RRP (overnight reverse repurchase agreement) facility nearly empty, commercial bank reserves held at the Fed have been declining. Strategists at JPMorgan Chase, Bank of America, TD Securities, and Wrightson all expect the Fed to stop shrinking its approximately $6.6 trillion balance sheet this month. (Jinshi)