The OCC reports that total gross notional derivatives outstanding jumped by nearly 8% in Q1 2017 over Q4 2016. At $178 trillion, that is even more than the reported total for Q3 last year. The latest estimates largely confirm the idea that bank balance sheets were relatively more accommodative in 2017 than especially later 2016.

Among the more buoyant categories of derivatives, forex notionals increased to $36 trillion and a new record high. That was up 14% in Q1 from the prior quarter. It would certainly seem to suggest a basis for the decline in negative currency basis in that period (and thereafter, since swap rates and spreads tend to be lagging indications in this way). The “dollar” shortage appears to have become relatively less of one in the first three months of 2017.

While positive in the sense that persistent prior declines were for this latest period interrupted, there isn’t any indication that the larger decay in offered balance sheet capacity has ended. Though notionals were up over Q4, year-over-year implied capacity is still down significantly. At $178 trillion, that was almost 8% less than what was reported for Q1 2016, and still 30% below the peak in 2011.

In other words, what appears in these figures is variation in the otherwise overall same negative direction. That variation is not unimportant, of course, for that relative reduction in “dollar” pressure has caused the Fed to wonder what is going on in the world as it seeks to “tighten” via the federal funds market. From the June 2017 policy minutes:

They also noted that, according to some measures, financial conditions had eased even as the Committee reduced policy accommodation and market participants continued to expect further steps to tighten monetary policy. Participants discussed possible reasons why financial conditions had not tightened.

Citigroup overtook JP Morgan for a second time in the top dealer spot among US banks. It’s derivative book gained 15% in the quarter, while JPM’s grew more modestly at just 3%. As a result, Citi’s $50.3 trillion places them just above the bank that used to unequivocally rule the derivative space (but very importantly has ceded its station).