Long-Term Pace

Think of it this way

It is stepping on the gas, as opposed to topping up the oil, which is what the gray bar represents. Both keep the car running, but only one makes it go faster.

What is Long-Term Pace?

How much the securities in the Fed's portfolio that are NOT bills have grown in four weeks: notes, bonds, inflation-linked debt and mortgage-backed securities. It is the part that deserves to be called QE when it rises and QT when it falls, because buying long maturities is what makes credit cheaper across the whole economy. It is calculated by subtracting bills from the total, both from the same weekly report.

How to read Long-Term Pace

Green when the long-term portfolio grows and red when it shrinks. Together with the gray bill bar it adds up to the total pace, so you can see at a glance what it is made of: if the growth is all gray, the Fed is replenishing reserves; if there is green, it is stimulating. Lag: none; money is created on the same day.

What Long-Term Pace means for the market

It is the signal markets read as a change of stance. A central bank buying long maturities is trying to make credit cheaper; one that only buys bills is keeping the machinery running.

Where the money flows

The Fed pays with new money and the security goes onto its balance sheet; when it matures and is not replaced, that money is destroyed. The difference from buying bills is not in the path but in which interest rate it ends up moving: the long-term rate, on which mortgages and stock valuations depend.

What to watch in Long-Term Pace

When the total pace turns positive, check whether there is green. Without green there is no stimulus, however much the portfolio grows.

The part of the pace that is stimulus: notes, bonds and mortgage-backed securities.