Except for a brief reprieve during SVB's failure, the Fed continues to let the treasury and agency bonds it previously purchased mature, without recycling the proceeds it receives to purchase replacement bonds (i.e., the Fed is destroying the money):
https://fred.stlouisfed.org/graph/fredgraph.png?g=15IkH
Every day, the US Treasury must issue new bonds to replace those bonds it repays.
Given that the Fed is not stepping in to buy more treasury bonds in the open market, the private sector -- individuals, 401(k) plans, pension plans, endowments, mutual funds, etc. -- must find additional liquidity somewhere to buy the new bonds. The US Treasury will issue those bonds at the market-clearing price.
A similar logic applies to agency bonds.
Every day.
Of course bank deposits are dwindling!
https://fred.stlouisfed.org/graph/fredgraph.png?g=15IkH
Every day, the US Treasury must issue new bonds to replace those bonds it repays.
Given that the Fed is not stepping in to buy more treasury bonds in the open market, the private sector -- individuals, 401(k) plans, pension plans, endowments, mutual funds, etc. -- must find additional liquidity somewhere to buy the new bonds. The US Treasury will issue those bonds at the market-clearing price.
A similar logic applies to agency bonds.
Every day.
Of course bank deposits are dwindling!