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Fast Facts: $600 Billion Treasury Large-Scale Asset Purchase Program
On November 3, 2010, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the New York Fed to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011.
As indicated by the FOMC, the objective of the Fed's purchase program was to "promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate." 1
The $600 billion Treasury purchase program was completed on June 30, 2011, as directed by the FOMC.
While conducting the Treasury purchase program, the FOMC maintained the existing directive to the Desk to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. The Desk conducted all purchases as one consolidated purchase program.
The Fed's asset purchases were conducted through competitive auctions, which were pre-announced on a monthly basis. In determining which offers to accept, the Fed compared each offer with the current secondary market prices of similar securities, as well as with its own assessment of the fair value of those securities, and took only those offers that appeared attractive. This procedure worked to ensure that the Fed received the best available prices for the securities it purchased.
The Fed purchases securities from a group of financial institutions called primary dealers. Although only the primary dealers trade directly with the Fed, any investor can sell securities to the Fed through the primary dealers. This is the same way the Fed has operated for decades in its permanent open market operations (or POMOs). The list of primary dealers is published on the New York Fed's website.
The Fed published a monthly tentative outright treasury operation schedule including operation dates and targeted purchase amounts to increase transparency and provide market guidance. Specific information about individual operations, including the total amount purchased and the breakdown of purchases by security were released immediately following the close of an operation. Information about prices paid was released on a monthly basis for the prior monthly period. Greater transparency improves a broader understanding of the Fed's policies and encourages wider participation from investors and smoother market functioning, which helps ensure that the Fed receives fair prices on its purchases.
The $600 billion Treasury purchase program began on November 12, 2010, and purchases concluded on June 30, 2011.
The Desk conducted $767 billion of purchases of longer-term Treasury securities from November 12, 2010, through June 30, 2011, $600 billion associated with the large scale asset purchase program and $167 billion associated with principal reinvestment.
The Federal Reserve actively communicated its activities associated with the $600 billion Treasury purchase program.
Weekly Treasury holdings totals were also published as part of a single line item in the Federal Reserve's H 4.1 data release and further details provided in the System Open Market Account (SOMA) Annual Report.
Prices paid in individual operations are released at the end of each monthly schedule period. For each security purchased in each operation, the Desk released the weighted-average accepted price, the highest accepted price, and the proportion accepted of each proposition submitted at the highest accepted price.