Markets may focus on the balance sheet, not the politics
Kevin Warsh's Senate nomination hearing is scheduled for 21 April 2026 and will formally centre on his candidacy to lead the Fed. For markets, though, the more important question may be how he now sees the central bank's balance sheet.
As of 15 April 2026, the Fed's assets stood at $6.71 tn, including $4.41 tn in Treasuries and almost $2 tn in agency MBS. At the same time, the Fed is still conducting technical bill purchases, albeit at a slower pace than before.
That backdrop suggests the market's base case ahead of the hearing may not be an immediate hard return to quantitative tightening. Instead, traders may be looking for clues on when the current liquidity bridge will be phased out and how any further balance-sheet reduction may be handled.
The Fed is already slowing bill purchases after tax season
In the current schedule for 14 April to 13 May 2026, the New York Fed desk plans around $15.5 bn of reinvestments and an additional $25 bn of bill purchases aimed at maintaining an adequate supply of reserves. That is materially below the earlier pace of $40 bn a month and fits with Roberto Perli's March remarks that purchases would probably slow significantly after tax season.
At the same time, official Fed data show the Treasury General Account has risen to $924.4 bn while bank reserves have fallen to around $2.98 tn. That still does not look like a comfortable backdrop for an aggressive shrinkage of the balance sheet.