At its meeting on July 30-31, 2019, the Federal Open Market Committee (FOMC) decided to conclude the reduction of aggregate securities holdings in the System Open Market Account (SOMA) two months earlier than previously indicated. The FOMC directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to roll over at auction all principal payments from the Federal Reserve’s holdings of Treasury securities and to reinvest all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities (MBS) effective August 1, 2019. Rollovers of principal payments from maturing Treasury securities will continue to be reinvested in new Treasury securities being issued on the maturity date. Principal payments from agency debt and agency MBS up to a maximum amount of $20 billion per month will be reinvested in Treasury securities through secondary market purchases; agency debt and agency MBS principal payments in excess of $20 billion each month will continue to be reinvested in agency MBS.
Treasury securities purchases associated with the reinvestment of agency debt and agency MBS principal payments will be conducted in the secondary market across a range of maturities to roughly match the maturity composition of Treasury securities outstanding. The FOMC will revisit this initial reinvestment plan in connection with its deliberations regarding the longer-run composition of the SOMA portfolio.
Under this guidance, the Desk plans to distribute secondary market Treasury reinvestment purchases across eleven different sectors, including nominal coupons, bills, Treasury Inflation-Protected Securities, and Floating Rate Notes. The amount of purchases in each sector will be approximately proportional to the 12-month average of the par amount of Treasury securities outstanding in each sector relative to the total amount outstanding across all sectors, measured at the end of July 2019.
The Desk will announce the planned monthly amount of secondary market Treasury reinvestment purchases up to the $20 billion maximum on or around the ninth business day of each month. At that time, the Desk will also release a tentative schedule of purchase operations that will be conducted over the one-month period until the next announcement. The Desk plans to release the first schedule of Treasury purchase operations on August 13, 2019.
Any principal payments from agency debt and agency MBS in excess of $20 billion per month will continue to be reinvested in agency MBS. For these purchases, the Desk will continue its current practice of announcing the planned amount of agency MBS purchases on or around the ninth business day of each month and releasing a tentative schedule of purchase operations twice a month, on or around the ninth and the nineteenth business days. The Desk plans to release its next schedule of MBS purchase operations on August 13, 2019.
Additional information on Treasury rollovers and Treasury and agency MBS reinvestment purchases can be found in the following locations:
FAQs: Treasury Reinvestments – Rollovers »
FAQs: Treasury Reinvestments – Purchases »
FAQs: Agency MBS Reinvestment Purchases »