Quantitative Easing I
Between August 2008 and March 2010, Fed bought $1.75 trillion of mortgage debt and treasuries. On March 16, 2010, the Federal Reserve announced that it was wrapping up its (bond-buying) program of $1.75 trillion in mortgage-backed securities and bonds.
Quantitative Easing II
Less than eight months after wrapping up its QE I, the Federal Reserve announced a new round of bond-buying program, called the QE II. Federal Reserve launched the $600 billion bond-buying program, or QE II, in November 2010. On June 22, 2011, Fed said that it would buy the last of the $600 billion in bonds by the end of the month and conclude the program.
Operation Twist: Fed's Decision to Buy $400 billion Long-Term Securities
After a two-day FOMC meeting (September 20-21, 2011), Federal Reserve has announced on September 21, 2011 that it would sell shorter-term (maturing 3 years or sooner) treasury securities to buy $400 billion longer-term securities (maturing 6 to 30 years). Fed's total portfolio is $2.9 trillion, mostly treasury securities and mortgage-backed securities. The shift will be complete by June 2012. After the Fed announcement, the yield to the 10-year trasury security fell to 1.86%, lowest since 1962. Wall Street had expected for weeks the Fed's maneuver dubbed as Operation Twist, named after the similar Fed action known as Operation Nudge which had been started to be called as Twist after the Chubby Checker's dance craze that was sweeping the nation in the era of American Bandstand.
However, there were three dissenting voices in Fed.
Fed policymakers during the June 2012 Open Market Committee meeting decided to extend the $400 billion "Operation Twist", first announced in September 2011 and scheduled to expire in June 2012, through the end of the year by selling $267 billion in shorter-term securities (both Treasury securities and mortgage-backed securities) and replacing them by purchasing equivalent longer-term bonds that would mature in six to 30 years and new mortgage-backed securities
How the Operation Twist will work?
Since Fed is planning to buy the longer-term securities, it will boost the price on those bonds. It would spur selling those bonds by the investors. The investors will then use the proceeds to buy relatively riskier asset class, say corporate bonds, thus raising the price of this class, which, in turn, will spur selling by the investors who hold these asset class. Now, the investors, who would sell the corporate bonds, will move to buy riskier high-yield corporate bonds. The whole idea of Operation Twist is to move the investment money toward risk-prone asset class, eventually moving the stock market up and jolting the economy on the sustainable growth path.
Quantitative Easing III
Before the deadline for Operation Twist to expire had even arrived, Federal Reserve shifted its stand on monetary policy with an open-ended campaign of purchase of mortgage bonds, starting with $23 billion buying in September 2012. The September 2012 figure of $23 billion translates into $40 billion monthly bond purchase, and Fed announced that it would continue to do so until the labor market improved "substantially". Each month, it would set a new target for bond buying, implying that $40 billion monthly figure was not a pre-fixed target. Fed, mandated with crafting monetary policy to ensure price stability and near-full employment, also announced that it would maintain Federal Funds Rate to near zero through middle of 2015. Eleven members of FOMC voted for QEIII, while the lone dissenter was Richmond Fed President Jeffrey Lacker.
The Fed policymakers during its two-day (October 23-24, 2012) Federal Open Market Committee meeting held its position steady. It is on track of buying $40 billion monthly bond-buying that had been launched after the last Fed policymaking meeting September 12-13. Fed is also continuing another long-term bond-buying program started in 2011 and slated to end December 2012. However, Fed may extend that $45 billion bond-buying program beyond December 2012 if the situation warrants such action.
TRIMMING THE BOND ASSETS
Federal Reserve policymakers during their September 19-20, 2017, Federal Open Market Committee meeting decided to unload the bonds accumulated in the bank's balance sheet during and aftermath of the Great Recession. According to the Fed's plan unveiled on September 20, 2017 at the end of two-day FOMC meeting,
* The offloading of nearly $4.5 trillion will be gradual
* $10 billion--$6 billion in treasury and $4 billion in mortgage bonds--will be put off the balance sheet every month, beginning in October 2017
* Every quarter for the next one year--January 2018, April 2018, July 2018 and October 2018--the offload amount is to increase by $10 billion until it reaches $50 billion per month
* Beyond October 2018, the offload amount is proposed to stay steady at $50 billion each month.
Between August 2008 and March 2010, Fed bought $1.75 trillion of mortgage debt and treasuries. On March 16, 2010, the Federal Reserve announced that it was wrapping up its (bond-buying) program of $1.75 trillion in mortgage-backed securities and bonds.
Quantitative Easing II
Less than eight months after wrapping up its QE I, the Federal Reserve announced a new round of bond-buying program, called the QE II. Federal Reserve launched the $600 billion bond-buying program, or QE II, in November 2010. On June 22, 2011, Fed said that it would buy the last of the $600 billion in bonds by the end of the month and conclude the program.
Operation Twist: Fed's Decision to Buy $400 billion Long-Term Securities
After a two-day FOMC meeting (September 20-21, 2011), Federal Reserve has announced on September 21, 2011 that it would sell shorter-term (maturing 3 years or sooner) treasury securities to buy $400 billion longer-term securities (maturing 6 to 30 years). Fed's total portfolio is $2.9 trillion, mostly treasury securities and mortgage-backed securities. The shift will be complete by June 2012. After the Fed announcement, the yield to the 10-year trasury security fell to 1.86%, lowest since 1962. Wall Street had expected for weeks the Fed's maneuver dubbed as Operation Twist, named after the similar Fed action known as Operation Nudge which had been started to be called as Twist after the Chubby Checker's dance craze that was sweeping the nation in the era of American Bandstand.
However, there were three dissenting voices in Fed.
Fed policymakers during the June 2012 Open Market Committee meeting decided to extend the $400 billion "Operation Twist", first announced in September 2011 and scheduled to expire in June 2012, through the end of the year by selling $267 billion in shorter-term securities (both Treasury securities and mortgage-backed securities) and replacing them by purchasing equivalent longer-term bonds that would mature in six to 30 years and new mortgage-backed securities
How the Operation Twist will work?
Since Fed is planning to buy the longer-term securities, it will boost the price on those bonds. It would spur selling those bonds by the investors. The investors will then use the proceeds to buy relatively riskier asset class, say corporate bonds, thus raising the price of this class, which, in turn, will spur selling by the investors who hold these asset class. Now, the investors, who would sell the corporate bonds, will move to buy riskier high-yield corporate bonds. The whole idea of Operation Twist is to move the investment money toward risk-prone asset class, eventually moving the stock market up and jolting the economy on the sustainable growth path.
Quantitative Easing III
Before the deadline for Operation Twist to expire had even arrived, Federal Reserve shifted its stand on monetary policy with an open-ended campaign of purchase of mortgage bonds, starting with $23 billion buying in September 2012. The September 2012 figure of $23 billion translates into $40 billion monthly bond purchase, and Fed announced that it would continue to do so until the labor market improved "substantially". Each month, it would set a new target for bond buying, implying that $40 billion monthly figure was not a pre-fixed target. Fed, mandated with crafting monetary policy to ensure price stability and near-full employment, also announced that it would maintain Federal Funds Rate to near zero through middle of 2015. Eleven members of FOMC voted for QEIII, while the lone dissenter was Richmond Fed President Jeffrey Lacker.
The Fed policymakers during its two-day (October 23-24, 2012) Federal Open Market Committee meeting held its position steady. It is on track of buying $40 billion monthly bond-buying that had been launched after the last Fed policymaking meeting September 12-13. Fed is also continuing another long-term bond-buying program started in 2011 and slated to end December 2012. However, Fed may extend that $45 billion bond-buying program beyond December 2012 if the situation warrants such action.
TRIMMING THE BOND ASSETS
Federal Reserve policymakers during their September 19-20, 2017, Federal Open Market Committee meeting decided to unload the bonds accumulated in the bank's balance sheet during and aftermath of the Great Recession. According to the Fed's plan unveiled on September 20, 2017 at the end of two-day FOMC meeting,
* The offloading of nearly $4.5 trillion will be gradual
* $10 billion--$6 billion in treasury and $4 billion in mortgage bonds--will be put off the balance sheet every month, beginning in October 2017
* Every quarter for the next one year--January 2018, April 2018, July 2018 and October 2018--the offload amount is to increase by $10 billion until it reaches $50 billion per month
* Beyond October 2018, the offload amount is proposed to stay steady at $50 billion each month.
No comments:
Post a Comment