FED Intervenes Again

Overnight we got news that due to the market disruptions, the Fed is buying more Treasuries across the yield curve.

To address temporary disruptions in the market for Treasury securities, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has updated the current monthly schedule of Treasury purchase operations.  

Today, the Desk will conduct purchases in each of five maturity sectors below at the times indicated, subject to reasonable prices.  

• 20 to 30 year sector at 10:30 – 10:45 am and 2:15 to 2:45 pm for around $4 billion each
• 7 to 20 year sector at 11:15 – 11:30 am  for around $5 billion
• 4.5 to 7 year sector at 12:00 – 12:15 pm for around $8 billion
• 2.25 to 4.5 year sector at 12:45 – 1:00 pm for around $8 billion
• 0 to 2.25 year sector at 1:30 – 1:45 pm for around $8 billion

These purchases are intended to address highly unusual disruptions in the market for Treasury securities associated with the coronavirus outbreak.  These purchases are part of the $80 billion of planned monthly purchases, including both $60 billion of reserve management purchases and $20 billion of reinvestments of principal payments received from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities. In these purchases, the Desk will include securities that are cheapest to deliver into active Treasury futures contracts as eligible securities for purchase. The Desk intends to further bring forward remaining purchases for this monthly calendar and adjust terms of operations as needed to foster smooth Treasury market functioning and efficient and effective policy implementation.  A revised schedule will be posted.

And the Repo operations continue to grow:

Net effect is to continue to grow their balance sheet. What else will they buy to try to shore up the markets? And what is the cost of all this?