On September 13, 2012, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to begin purchasing additional agency mortgage-backed securities (MBS) at a pace of $40 billion per month. The FOMC also directed the Desk to continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities as announced in June and to maintain its existing policy of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS.
The FOMC noted that these actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
Purchases of Agency MBS
The purchases of additional agency MBS will begin tomorrow, and are expected to total approximately $23 billion over the remainder of September. Going forward, details associated with the additional amount of MBS to be purchased each month will be announced on or around the last business day of the prior month.
Consistent with current practice, the planned amount of purchases associated with reinvestments of principal payments on holdings of agency securities that are anticipated to take place over each monthly period will be announced on or around the eighth business day of the prior month. The next monthly reinvestment purchase amount was also published today, and can be found here: http://www.newyorkfed.org/markets/ambs/ambs_schedule.html.
The Desk anticipates that the agency MBS purchases associated with both the additional asset purchases and the principal reinvestments will likely be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market, although the Desk may purchase other agency MBS if market conditions warrant.
Consistent with current practices, all purchases of agency MBS will be conducted with the Federal Reserve’s primary dealers through a competitive bidding process and results will be published on the Federal Reserve Bank of New York’s website. The Desk will also continue to publish transaction prices for individual operations on a monthly basis.
Frequently Asked Questions associated with these purchases will be released later today.