Bank reserves are also gradually moving up, though still down for the year. So far the growth in reserves has been underwhelming.

Bank reserves (soucre: FRB)

With the newly announced treasury purchases, this should pick up steam. And the settlement schedule will be much less "lumpy" than agency MBS.

One thing worth mentioning here is that the US treasury will be borrowing $45bn a month effectively interest free. That's because the Fed passes interest income back to the Treasury (less its own expenses) via earnings distribution once a year. This certainly helps reduce pressure on Washington to cut spending quickly - the can will be kicked down the road once more.

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