WASHINGTON (MNI) – The Federal Open Market Committee released the
following statement Wednesday in addtion to the monetary policy
statement, regarding the continuation of the maturity extension program:
On June 20, 2012, the Federal Open Market Committee (FOMC) directed
the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of
New York to continue through the end of the year its program to extend
the average maturity of the Federal Reserves holdings of Treasury
securities. Specifically, the Desk was directed to purchase Treasury
securities with remaining maturities of 6 years to 30 years and to sell
or redeem an equal par value of Treasury securities with remaining
maturities of approximately 3 years or less. The continuation of the
maturity extension program will proceed at the current pace and result
in the purchase, as well as the sale and redemption, of about $267
billion in Treasury securities by the end of 2012.
The FOMC also directed the Desk to continue reinvesting principal
payments from its holdings of agency debt and agency mortgage-backed
securities (MBS) in agency MBS, and to suspend, for the duration of the
maturity extension program, rolling over maturing Treasury securities
into new issues at auction.
Purchases of Treasury securities for the maturity extension program
will be distributed across five sectors using the same approximate
weights that have been used in the purchases to date:
Nominal Coupon Securities by Remaining Maturity* TIPS**
———————————————— ———-
68 Years 810 Years 1020 Years 2030 Years 630 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.
This distribution could be altered if market conditions warrant.
A combination of sales and redemptions of Treasury securities will
be conducted to match the amount of purchases over the program. Sales of
Treasury securities will take place in securities maturing between
January 2013 and January 2016. Securities maturing in the second half of
2012 will be redeemed that is, allowed to mature without reinvestment
since redeeming maturing Treasury securities has a nearly identical
effect on the portfolio as selling securities that are approaching
maturity. Once the maturity extension program is completed, the
Federal Reserve will hold almost no securities maturing through January
2016.
The Desk will continue to publish a tentative schedule of
operations for the following calendar month on or around the last
business day of each month. The schedule will include the anticipated
amount of redemptions, purchases and sales to be conducted, 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. The next schedule of
operations will be released on Friday, June 29.
All other program details remain the same at this time. Additional
information on the programs structure can be found in the revised
Frequently Asked Questions for the Maturity Extension Program.
** MNI Washington Bureau: 202-371-2121 **
[TOPICS: MMUFE$,MGU$$$,M$U$$$]
