The Federal Reserve said Monday it will go a second consecutive month without buying U.S. Treasuries for reserve-management purposes in the upcoming operating period, a sign that policymakers view reserve levels in the banking system as appropriate. The New York Fed’s open market trading desk said it does not plan reserve-management purchases during the monthly period running through Oct. 14, though it still expects to conduct about $15.6 billion in reinvestment purchases over the same window. According to the report, the move points to confidence in money-market conditions rather than a shift in the Fed’s broader policy stance. That view is reflected in the Secured Overnight Financing Rate, or SOFR, which has spent most of the past month near or below the Interest on Reserve Balances rate. The report also noted that the U.S. Treasury has reduced bill supply ahead of the quarterly tax payment deadline. It added that reserve-management purchases are meant to fine-tune reserve levels in the banking system and are not the same as traditional quantitative easing, while mortgage-backed securities reinvestment operations continue as part of balance-sheet management.
The Federal Reserve said Monday it will suspend U.S. Treasury purchases for reserve-management purposes for a second straight month in the next operating cycle, indicating that policymakers see bank reserve levels in the financial system as adequate.
The New York Fed’s open market operations desk said it does not plan to conduct reserve-management purchases during the monthly period ending Oct. 14. It still expects to carry out about $15.6 billion in reinvestment purchases over the same period.
According to the report, the decision to pause reserve-management buying shows confidence in the way funding markets are functioning. That was also reflected in the Secured Overnight Financing Rate, or SOFR, which has been near or below the Interest on Reserve Balances, or IORB, for most of the past month.
The report also said the U.S. Treasury has reduced Treasury bill supply ahead of the quarterly tax payment deadline.
It added that the change does not signal a shift in Federal Reserve monetary policy or its balance-sheet strategy. The note said reserve-management purchases are mainly used to adjust reserve levels in the banking system rather than serve as traditional quantitative easing. The Fed is still conducting operations tied to MBS reinvestments as part of its balance-sheet management.
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