FOMC Statement On Reinvestments In Treasury and MBS>

     WASHINGTON (MNI) - The following is text of an accompanying 

statement from the FOMC issued Wednesday regarding reinvestment of 

Treasury securities and agency mortgage-backed securities:

     During its meeting on September 19-20, 2017, the Federal 

Open Market Committee (FOMC) directed the Open Market Trading Desk (the 

Desk) at the Federal Reserve Bank of New York to initiate, in October 

2017, the program to gradually reduce the reinvestment of principal 

payments from the Federal Reserves securities holdings that is 

described in the Committees June 2017 addendum to its Policy 

Normalization Principles and Plans. 

     Specifically, the Committee directed the Desk to reinvest each 

months principal payments from Treasury securities, agency debt, and 

agency mortgage-backed securities (MBS) only to the extent that such 

payments exceed gradually rising caps. 

     The schedule of monthly caps consistent with the Committees 

September 20 decision and the June 2017 addendum is as follows: 

Monthly Caps on SOMA Securities Reductions

            Treasury Securities Agency Securities*

Oct  Dec 2017   $6 billion       $4 billion

Jan  Mar 2018  $12 billion       $8 billion

Apr  Jun 2018  $18 billion      $12 billion

Jul  Sep 2018  $24 billion      $16 billion

From Oct 2018** $30 billion      $20 billion

*Applies to combined principal payments of agency debt and agency MBS. 

** Once caps reach their maximum amounts, they will remain in effect 

until the Committee judges that the Federal Reserve is holding no more 

securities than necessary to implement monetary policy efficiently and 

effectively. 

     For Treasury securities, the Desk will roll over at auction the 

principal payments from the Federal Reserves holdings of Treasury 

securities maturing during each calendar month that exceed the cap 

amount for that month. The Desk will allocate that rollover amount 

across the months maturity dates in proportion to total maturities of 

SOMA Treasury holdings on each date. Consistent with current practice, 

rollovers will continue to be accomplished by placing non-competitive 

bids at Treasury auctions; the bids will be allocated across the 

securities being issued in proportion to their announced offering 

amounts. The initial cap will first be applied to the October scheduled 

maturities, which occur on October 31. 

     For agency securities, the Desk will reinvest in agency MBS the 

principal payments from the Federal Reserves holdings of agency debt 

and agency MBS received during each calendar month that exceed the cap 

amount for that month. Consistent with current practice, the Desks 

reinvestment purchases will continue to be concentrated in newly-issued 

agency MBS in the To- Be-Announced (TBA) market. The planned amount of 

reinvestments in agency MBS that is anticipated to take place over each 

monthly period will be announced on or around the ninth business day of 

the month and will generally be conducted over the subsequent one-month 

period until the next announcement. The initial cap will first be 

applied to the October planned purchases, which will be announced on 

October 13, the ninth business day of the month. 

--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com

[TOPICS: MT$$$$,MMUFE$,MGU$$$,M$U$$$]