TLDR – FED is executing QT exactly as it said it would Many folks are unimpressed with the effect QT has had on the FED’s BS thus far. Some are accusing the FED of lying about conducting it altogether. Others accusing it of being too slow. Universally though, these folks don’t seem to understand its mechanics. This post seeks to explain them and demonstrate that the FED is executing QT as it said it would. Note though it isn’t trying to defend the FEDs plan for QT, personally, Im in the go faster camp, so for those who would call me a shill for the FED, im not, just an observer/explainer of reality (with sources).
FED seemed to just stop reporting its UST purchases when QE stopped (notwithstanding they are still purchasing to reinvest maturities above the cap) see third paragraph in https://www.newyorkfed.org/markets/opolicy/operating_policy_220126 not really sure the rationale. You can back link them by cusip though if you go to the SOMA holdings page and look at the details for notes/bonds, the change in par from prior week column will increase when FED purchased UST at auction are issued, so you should see the 30yrs you mentioned on the 18th SOMA since it will issue on the 15th.
The 4b they bought on 3/9 look like existing securities (not newly auctioned/issued ones) which i presume they bought from their primary dealers. E.g. cusip 912828D56 which the fed bought 103m of is a 10yr note issued in august of 2014. You can see the same 103m increase in the FED holding of that cusip from SOMA 3/9 to SOMA 3/16
Hey John - great analysis. I ended up dumping all of the SOMA data into a SQLITE DB to query it as you suggested in your other post. I am stuck on one thing though and thought you might have an idea.
I cannot find any relation whatsoever between the desk's purchases of treasuries:
Two things in particular are confusing. One is that the most recent outright purchase of treasuries is listed as 3/9 (first link above), but there have clearly been purchases after that date if you look at treasurydirect auction results. For example there was a 30-year auction for 912810TJ7 on 8/3 which settled 8/11 in which the SOMA took down $13,282,157,000 but you don't see that reflect anywhere at all in the first link.
If we go in the other direction and look at the amount purchased on 3/9 as shown in the first link, 17.398B was submitted with 4.001B accepted across a range of CUSIPS and maturities. If you then try to find those SOMA purchases on treasurydirect, it's not there.
Hi Mark. Thank you!
FED seemed to just stop reporting its UST purchases when QE stopped (notwithstanding they are still purchasing to reinvest maturities above the cap) see third paragraph in https://www.newyorkfed.org/markets/opolicy/operating_policy_220126 not really sure the rationale. You can back link them by cusip though if you go to the SOMA holdings page and look at the details for notes/bonds, the change in par from prior week column will increase when FED purchased UST at auction are issued, so you should see the 30yrs you mentioned on the 18th SOMA since it will issue on the 15th.
The 4b they bought on 3/9 look like existing securities (not newly auctioned/issued ones) which i presume they bought from their primary dealers. E.g. cusip 912828D56 which the fed bought 103m of is a 10yr note issued in august of 2014. You can see the same 103m increase in the FED holding of that cusip from SOMA 3/9 to SOMA 3/16
Hope that helps,
Hey John - great analysis. I ended up dumping all of the SOMA data into a SQLITE DB to query it as you suggested in your other post. I am stuck on one thing though and thought you might have an idea.
I cannot find any relation whatsoever between the desk's purchases of treasuries:
https://www.newyorkfed.org/markets/desk-operations/treasury-securities
and auction results on the treasury's site:
https://www.treasurydirect.gov/instit/annceresult/press/press_auctionresults.htm
Two things in particular are confusing. One is that the most recent outright purchase of treasuries is listed as 3/9 (first link above), but there have clearly been purchases after that date if you look at treasurydirect auction results. For example there was a 30-year auction for 912810TJ7 on 8/3 which settled 8/11 in which the SOMA took down $13,282,157,000 but you don't see that reflect anywhere at all in the first link.
If we go in the other direction and look at the amount purchased on 3/9 as shown in the first link, 17.398B was submitted with 4.001B accepted across a range of CUSIPS and maturities. If you then try to find those SOMA purchases on treasurydirect, it's not there.
Thanks for sharing!