Fed's balance sheet expands in latest week

• On 5:32 pm EST, Thursday November 5, 2009

NEW YORK (Reuters) - The U.S. Federal Reserve's balance sheet grew slightly in the latest week on increased holdings of government and mortgage agency debt, Fed data showed on Thursday.

The Fed's balance sheet liabilities -- a broad gauge of its lending to the financial system -- rose to $2.147 trillion on Wednesday from $2.144 trillion a week ago.

The Fed's holding of Treasuries rose to $776.51 billion on Wednesday from $774.56 billion a week ago. The increase occurred despite the U.S. central bank's completion last week of a program to purchase Treasuries.

The Fed's ownership of agency securities, or debt issued mainly by Fannie Mae (NYSE:FNM - News), Freddie Mac (NYSE:FRE - News) and the Federal Home Loan Bank System, climbed to $146.96 billion on Wednesday from $141.60 billion a week earlier.

On Wednesday, the Fed said it pared the amount of agency debt it plans to purchase to $175 billion from the initial $200 billion due to limited supply.

The central bank's agency mortgage securities holdings edged up to $774.39 billion on Wednesday from $774.07 billion a week earlier. It bought $16 billion in MBS in the last week, part of its intended $1.25 trillion purchase of these securities.

The Fed's securities purchases have been the cornerstone of its quantitative easing measures aimed to hold down interest rates in an effort to stimulate the economy.

As the Fed's holding of government and agency debt continued to pile up, its lending to financial companies grew a bit in the latest week, Fed data showed.

Direct loans to banks and financial companies increased to a daily rate of $110.61 billion in the week ended November 4 from a daily pace of $107.63 billion in the week ended October 28.

For example, overnight loans at the Fed's discount window to credit-worthy banks increased to $22.61 billion a day from $22.58 billion a day the previous week.

Some parts of the Fed's balance sheet shrank on the week.

The central bank's swap lines to lend dollars overseas decreased to a daily pace of $31.88 billion from $33.32 billion per day previous week.

The Fed's commercial paper facility shrank to $14.48 billion on Wednesday from $19.02 billion a week ago. The Commercial Paper Funding Facility, which started in October 2008 to serve as a backstop for these short-dated corporate IOU's, had as much as $350.5 billion in assets in January.

(Reporting by Richard Leong; Editing by Kenneth Barry)

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