On September 21, 2011, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to purchase, by the end of June 2012, $400 billion in par value of Treasury securities with remaining maturities of 6 years to 30 years and to sell, over the same period, an equal par value of Treasury securities with remaining maturities of 3 years or less.
The FOMC also directed the Desk to reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities (MBS) in agency MBS.
Maturity Extension Program
Purchases of Treasury securities associated with the $400 billion maturity extension program will be distributed across five sectors based on the approximate weights in the following table, although this distribution could be altered if market conditions warrant:
| Nominal Coupon Securities by Maturity Range* | TIPS** |
|||
6 – 8 Years |
8 – 10 Years |
10 – 20 Years |
20 – 30 Years |
TIPS 6 – 30 Years |
32% |
32% |
4% |
29% |
3% |
*The on-the-run 10-year note will be considered part of the 8- to 10-year sector.
**TIPS weights are based on unadjusted par amounts.
Sales associated with the $400 billion maturity extension program will take place in Treasury securities with remaining maturities of 3 months to 3 years. Roughly three quarters of System Open Market Account (SOMA) holdings of Treasury securities in this maturity range will be sold.
On or around the last business day of each month, the Desk will publish a tentative schedule of operations expected to take place over the following calendar month. The schedule will include the anticipated total amount of purchases and sales to be conducted over the month, operation dates, settlement dates, security types (nominal coupons or TIPS) to be purchased or sold, the maturity date range of eligible issues, and an expected range for the size of each operation. A schedule of operations expected to take place in October will be released on Friday, September 30.
Purchases and sales will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions operated through the Desk’s FedTrade system. Consistent with current practices, the results of each operation will be published on the Federal Reserve Bank of New York’s website shortly after each operation has concluded. In order to ensure the transparency of these operations, the Desk will publish information on the transaction prices in individual operations at the end of each month, coinciding with the release of the next month’s schedule.
A set of Frequently Asked Questions associated with this program will be released on Monday, September 26.
Reinvestments of Principal Payments on Agency Securities
Beginning on Monday, October 3, principal payments from holdings of agency debt and agency MBS will be reinvested in agency MBS through purchases in the secondary market. The current practice of reinvesting principal payments from holdings of agency debt and agency MBS in Treasury securities will be halted at that time. The operations currently scheduled for September 23 and September 27 will take place as previously announced.
Going forward, on or around the eighth business day of each month, the Desk will publish the planned amount of purchases associated with the reinvestment of principal payments from agency debt and agency MBS expected to be received over the next monthly period.
Reinvestment purchases will be conducted with the Federal Reserve’s primary dealers through a competitive bidding process. The results of each week’s purchases will be published on the Federal Reserve Bank of New York’s website. In order to ensure the transparency of these operations, the Desk will publish information on the transaction prices in individual operations at the end of each monthly period, coinciding with the release of the next period’s planned purchase amount.
A set of Frequently Asked Questions associated with this program will be released on Monday, September 26.
