Signal 1:
The Event: Morgan Stanley published analysis on February 9 confirming that post-2008 regulatory architecture LCR requirements, stress test buffers structurally prevents the Fed from shrinking its balance sheet back to pre-pandemic levels.
The Number: The Fed balance sheet sits at roughly $6.6 trillion, down from the $9 trillion peak, with the reduction driven almost entirely by RRP decline not actual asset runoff. MBS holdings, at current prepayment speeds, would take approximately ten years to halve.