Liquid Insight: Warsh & Fed B/S: more bark than bite

Research evidence excerpt

Liquid Insight: Warsh & Fed B/S: more bark than bite

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Liquid Insight

Warsh & Fed B/S: more bark than bite

Key takeaways 18 May 2026

Rates and Currencies Research• Warsh is Fed B/S critic; he won't change much. Focus on (1) size (2) composition

Global

• Size = big drop unlikely. Composition = Fed UST WAM shorter but won't matter much

• Blue sky: bank SRP at IOR + reporting changes = reserve buffer drop. Blue sky may be

Global Rates & Currencies Research

more impactful vs conventional views MLI (UK)

Mark Cabana, CFA

Rates Strategist

BofASBy Mark Cabana & Katie Craig +1 646 743 7013

Exhibit 1: Fed balance sheet liabilities ($tn) mark.cabana@bofa.com

Currency, reserves, and TGA make up the largest shares of the Fed’s liabilities Katie Craig

10 Currency Reserves TGA Foreign RRP ON RRP Other BofAS +1 646 743 7016

katie.craig@bofa.com

8 Oliver Levingston

FX and Rates Strategist

Merrill Lynch (Hong Kong)

6 +852 3508 4631

oliver.levingston@bofa.com

4 See Team Page for List of Analysts

Recent Publications 0

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Source: Bloomberg

BofA GLOBAL RESEARCH 14-May-26 Global government bond supply

update: same same, but different

Warsh & Fed balance sheet: all hat, almost no cattle 13-May-26 Fading the USD Vibe-cession

Kevin Warsh is now Senate confirmed as the new Fed Chair. A frequent client Q: "what 12-May-26 Occam’s razor applies in rates

11-May-26 US rates: hike risk underpriced

will Warsh do on the Fed balance sheet?" Our A: "not much". We elaborate below. 7-May-26 April jobs: Fed hike pricing in the

balanceClients should focus on 2 aspects of Fed sheet: (1) size (2) composition. Size likely won’t 6-May-26 German 2027 draft budget –

change much, composition will. We expect neither to matter much for markets.