Below is a graph of the current (8/19/09) progress of Fed. MBS purchases and settlements:
So far the NY Fed has made net purchase commitments of over $760B of MBS, while only about $600B of these trades have settled so far. The Fed is creating new reserves to fund these purchases, so the Fed balance sheets stands to increase when these trades settle, unless the Fed is able to reduce other items on the balance sheet by an offsetting amount.
This year the Fed has been able to hold the balance sheet fairly steady at about the $2T level, by reducing certain items while it has purchased over $600B of MBS and over $300B of Treasury and US Agency bonds. Last week the balance sheet expanded by about $45B, the snip below from the H.4.1 report highlights some of the larger transactions:
You can see that Securities Held Outright rose by $76B due mainly to MBS and Treasury purchases. This amount was somewhat offset by reductions in Term Auction Credit and Central Bank Liquidity Swaps.
I've numbered 3 line items that I think represent the main options for the Fed to work to reduce if they, for political reasons, desire to keep the balance sheet steady at about the $2T level, while they continue with their current goals of purchasing an additional $800B of securities over the remainder of this year. Even if they are able to reduce all 3 of these special liquidity programs to zero, the balance sheet stands to expand considerably, and the additional new reserves created could put upward pressure on bond prices over this time.