At the meeting that concluded on May 1, 2024, the Federal Open Market Committee (FOMC) decided to slow the pace of reduction of its securities holdings, consistent with its previously announced Plans for Reducing the Size of the Federal Reserve’s Balance Sheet, beginning June 1, 2024. Specifically, the Committee directed the Open Market Trading Desk at the Federal Reserve Bank of New York (the Desk) to lower the cap on monthly Treasury redemptions to $25 billion and keep the cap on monthly agency debt and agency mortgage-backed securities (MBS) redemptions unchanged at $35 billion. Additionally, the FOMC directed the Desk to reinvest any principal payments received from agency debt and agency MBS holdings in excess of the $35 billion monthly cap into Treasury securities.
Consistent with current practice, the redemptions of Treasury securities each calendar month will include Treasury coupon securities and, to the extent that maturing coupon securities are less than the monthly cap, Treasury bills. The Desk will roll over at auction the amount of principal payments from System Open Market Account (SOMA) holdings of Treasury securities maturing during each calendar month that exceeds the cap amount for that month. The Desk will allocate Treasury coupon rollover amounts across the month’s coupon maturity dates in proportion to total SOMA coupon maturities on each date. The Desk will separately allocate bill rollover amounts across the month’s bill maturity dates in proportion to total SOMA bill maturities on each date. Rollovers will continue to be accomplished by placing non-competitive bids at Treasury auctions; the bids will be allocated across the securities being issued on each auction date in proportion to their announced offering amounts.
Should paydowns on SOMA holdings of agency debt and agency MBS exceed the $35 billion redemption cap, the Desk will announce the monthly amount of Treasury secondary market reinvestment purchases and a tentative schedule of purchase operations on or around the ninth business day of each month. Secondary market purchases will generally be conducted over the one-month period until the next announcement. Under this guidance, the Desk plans to distribute secondary market Treasury reinvestment purchases across nominal coupons, bills, Treasury Inflation-Protected Securities, and Floating Rate Notes across a range of maturities to roughly match the maturity composition of outstanding securities. The Desk will continue to conduct regular small value purchases and sales of Treasury securities and agency MBS under its normal process for maintaining operational readiness as announced in October 2022.