Excess reserves came down, short term Treasuries go up, government seigniorage saves the day. But the Fed now carries a larger variation between excess reserves and Treasuries held. The excess reserves having a harder time to respond, the debt cartel hedge is becoming expensive.
Think of options in reverse, they need a larger margin to straighten out those interest charges so the safe rate is safe again. The entire chain has to rescale, contract and deal with higher margin between Treasuries and reserves on the sheet. They probably cannot do it and we will get a bit of the blue bar, but it is still a split decision.
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