Fed Says It Will Maintain Aggressive Debt Purchases Next Week
March 27 2020 - 6:34PM
Dow Jones News
By Nick Timiraos
The Federal Reserve will continue its aggressive purchases of
Treasury and mortgage-backed securities next week, very slowly
lowering its unprecedented buying of government debt.
The central bank said Friday it would buy $345 billion in
Treasury securities next week, down from $375 billion this week but
up from $250 billion last week. It will buy $200 billion in
mortgage-backed securities, down from $250 billion this week but up
from $67 billion last week.
The Fed announced plans to purchase at least $700 billion in
government debt and mortgage-backed securities on March 15, then
dramatically ramped up its purchases to dislodge unusual trading
conditions in critical financing markets that reflected a rush for
cash by investors.
On Monday, the Fed clarified that these purchases would be
open-ended.
On Friday, the Fed laid out how it would make next week's
scheduled purchases. The central bank will buy $75 billion a day in
Treasurys through Wednesday, then $60 billion a day on Thursday and
Friday. It will buy $40 billion in mortgage securities per day.
The purchases are huge. The Fed will be buying more each day
next week than it did a month during its most recent round of bond
purchases, which it launched in September 2012 and ended two years
later. For more than one year, the Fed was buying $85 billion in
securities a month.
The Fed has greatly expanded its balance sheet to arrest strains
across financial markets amid the novel coronavirus pandemic. Its
holdings swelled by $942 billion over the two weeks ended
Wednesday, bringing its total assets to $5.25 trillion, a
record.
"The Fed is winning back control of the Treasury market where
trading conditions have improved very substantially in recent days
with much reduced price dislocations and [mortgage] market
functioning has also improved notably," said analysts at Evercore
ISI in a client note on Friday. "It is buying at such a rapid pace
it has to be careful not to oversteer and distort markets in a new
direction."
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
March 27, 2020 18:19 ET (22:19 GMT)
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