GlossaryQT/QE indicator (Fed balance sheet)
QT/QE indicator (Fed balance sheet)
Shows the weekly change in the Fed's total assets in billions of US dollars. When the balance sheet grows, the central bank is adding liquidity to the system (QE, quantitative easing); when it shrinks, it is withdrawing liquidity (QT, quantitative tightening).
What is drawn
The line shows the change in the Fed's total assets from the previous release, in billions of USD. The Fed reports its balance sheet once a week, as of Wednesday. The difference is taken between two consecutive releases, not between candles, and holds until the next one. On daily candles, the line therefore runs as a staircase with one step per week.
From zero up, the week counts as QE (balance sheet growing); below zero, as QT (balance sheet shrinking). The line is green from zero up and red below. The area above zero has a green background, the area below a red one, and the zero line is bold.
How to read it
- One week is noise. The balance sheet fluctuates with repo operations, emergency loans, currency swaps and the maturity dates of bonds held. What is meaningful is which color dominates over weeks and months: persistent red means a QT program is running, persistent green that the Fed is buying.
- Large spikes are crisis signals. In March 2020 and in the banking crisis of March 2023, the balance sheet rose by hundreds of billions within a few weeks. These were mainly emergency loans rather than planned bond purchases, but they also worked as liquidity.
- QE counts as a tailwind for risk assets, QT as a headwind. The effect shows up over quarters more than over individual weeks.
Good to know
- It measures total assets, not just directly held securities. They also include repo and lending positions, and so they swing more in times of stress than the bond portfolio alone.
- No settings other than the style. Intended for 1D to 1W; on shorter intervals, one value stands across very many candles.