scholarly journals Direct Purchases of U.S. Treasury Securities by Federal Reserve Banks

2014 ◽  
Author(s):  
Kenneth Garbade
Keyword(s):  
Federal Reserve ◽  
Treasury Securities

Any US Fed balance sheet unwinding may be disorderly

2020 ◽  
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Target Range ◽  
Treasury Bills ◽  
Content Type ◽  
Treasury Securities ◽  
The Us ◽  
Repo Rate ◽  
The Interest Rate

Subject US Federal Reserve policy. Significance The US repurchase agreement (repo) rate, the interest rate on overnight loans backed by Treasury securities to facilitate a range of transactions, suddenly soared above 5% on September 15, 2019. There were immediate effects across financial markets, but the Federal Reserve (Fed) quickly bought up Treasury bills and the repo rate returned to the Fed’s 2.00-2.25% target range. However, concerns linger about whether a spike could recur. The Fed has increased its balance sheet by more than 10% since September but sees this as a temporary adjustment rather than a policy change. Impacts Having narrowed to 3.7 trillion dollars by August 2019, the Fed’s balance sheet could pass its 4.4-trillion-dollar record this year. The Fed will seek to ensure its has enough resources for corporate-tax payment dates but without increasing its holdings indefinitely. Increasing the size of the Fed’s balance sheet could limit the effectiveness of further balance sheet expansion in a future crisis.

Market vs. administered Federal Reserve policy rates

2014 ◽  
Vol 6 (4) ◽  
pp. 331-341
Author(s):  
David Walker
Keyword(s):  
Federal Reserve ◽  
Yield Curve ◽  
Statistical Significance ◽  
Ordinary Least Squares ◽  
Content Type ◽  
Treasury Securities ◽  
Market Rate ◽  
Cent Level ◽  
One Year ◽  
Federal Reserve Policy

Purpose – The purpose of this study is to contrast the discount and the Fed funds rates since 1990 and the variables that influence these rates. On the basis of quarterly data, since 1990, the primary determinants of the two policy rates are: the rate of inflation, the unemployment rate and rates on US Treasury securities, i. Design/methodology/approach – Ordinary least squares models are developed with autocorrelation removed. Findings – 12 per cent level in the Fed funds market rate models. The statistical significance of the coefficient of the spread between long-term and short-term Treasury rates is a projection of a recession one year in the future. The statistical significance of the coefficients for unemployment, one and two quarter the autocorrelation coefficients, adjusted R-square values and Durbin-Watson statistics are similar for the two policy rate models. Research limitations/implications – The major limitation is that monthly data are not available for further tests. Practical implications – The two Fed policy rates respond differently to the impacts of inflation, unemployment and yield curve tilts. Social implications – Expected recessions, reflected by the yield curve are not often anticipated. Originality/value – The approach and results have a different perspective from the work in most studies involving Federal Reserve policy rates.

scholarly journals Government Intervention and Strategic Trading in the U.S. Treasury Market

2018 ◽  
Vol 55 (1) ◽  
pp. 117-157 ◽  
Author(s):  
Paolo Pasquariello ◽  
Jennifer Roush ◽  
Clara Vega
Keyword(s):  
Federal Reserve ◽  
Government Intervention ◽  
Market Liquidity ◽  
Policy Uncertainty ◽  
Open Market ◽  
Treasury Securities ◽  
Strategic Trading ◽  
Treasury Market ◽  
Parsimonious Model ◽  
The Impact

We study the impact of permanent open market operations (POMOs) by the Federal Reserve on U.S. Treasury market liquidity. Using a parsimonious model of speculative trading, we conjecture that i) this form of government intervention improves market liquidity, contrary to conclusions drawn by existing literature; and ii) the extent of this improvement depends on the market’s information environment. Evidence from a novel sample of Federal Reserve POMOs during the 2000s indicates that bid–ask spreads of on-the-run Treasury securities decline when POMOs are executed, by an amount increasing in proxies for information heterogeneity among speculators, fundamental volatility, and POMO policy uncertainty, consistent with our model.

scholarly journals What Drives U.S. Treasury Re-use?

2021 ◽  
Vol 2021 (021r1) ◽  
pp. 1-54
Author(s):  
Sebastian Infante ◽  
◽  
Zack Saravay ◽  
Keyword(s):  
Federal Reserve ◽  
Financial System ◽  
Sharp Drop ◽  
Treasury Securities ◽  
Asset Purchases

We study what drives the re-use of U.S. Treasury securities in the financial system. Using confidential supervisory data, we estimate the degree of collateral re-use at the dealer level through their collateral multiplier : the ratio between a dealer's total secured funding and their outright holdings financed through secured funding. We find that Treasury re-use increases as the supply of available securities decreases, especially when supply declines due to Federal Reserve asset purchases. We also find that non-U.S. dealers' re-use increases when profits from intermediating cash are high, U.S. dealers' re-use increases when demand to source on-the-run Treasuries is high, and both types of dealers' re-use can alleviate safe asset scarcity. Finally, we document a sharp drop in Treasury re-use at the onset of the COVID-19 pandemic, with a subsequent reversal after the Federal Reserve's intervention to support market functioning.

scholarly journals What Drives U.S. Treasury Re-use?

2020 ◽  
Vol 2020 (101) ◽  
pp. 1-54
Author(s):  
Sebastian Infante ◽  
◽  
Zack Saravay ◽  
Keyword(s):  
Federal Reserve ◽  
Financial System ◽  
Sharp Drop ◽  
Treasury Securities ◽  
Asset Purchases

We study what drives the re-use of U.S. Treasury securities in the financial system. Using confidential supervisory data, we estimate the degree of collateral re-use at the dealer level through their collateral multiplier : the ratio between a dealer's secured funding and their outright holdings. We find that Treasury re-use increases as the supply of available securities decreases, especially when supply declines due to Federal Reserve asset purchases. We also find that non-U.S. dealers' re-use increases when profits from intermediating cash are high, U.S. dealers' re-use increases when demand to source on-the-run Treasuries is high, and both types of dealers' re-use can alleviate safe asset scarcity. Finally, we document a sharp drop in Treasury re-use at the onset of the COVID-19 pandemic, with a subsequent reversal after the Federal Reserve's intervention to support market functioning.

The Priority of Democracy

2011 ◽  
Author(s):  
Jack Knight ◽  
James Johnson
Keyword(s):  
Decision Making ◽  
Monetary Policy ◽  
Political Institutions ◽  
Federal Reserve ◽  
Democratic Politics ◽  
Institutional Choice ◽  
Democratic Process ◽  
Strong Case ◽  
The Subject ◽  
The Relationship

Pragmatism and its consequences are central issues in American politics today, yet scholars rarely examine in detail the relationship between pragmatism and politics. This book systematically explores the subject and makes a strong case for adopting a pragmatist approach to democratic politics—and for giving priority to democracy in the process of selecting and reforming political institutions. What is the primary value of democracy? When should we make decisions democratically and when should we rely on markets? And when should we accept the decisions of unelected officials, such as judges or bureaucrats? This book explores how a commitment to pragmatism should affect our answers to such important questions. It concludes that democracy is a good way of determining how these kinds of decisions should be made—even if what the democratic process determines is that not all decisions should be made democratically. So, for example, the democratically elected U.S. Congress may legitimately remove monetary policy from democratic decision-making by putting it under the control of the Federal Reserve. This book argues that pragmatism offers an original and compelling justification of democracy in terms of the unique contributions democratic institutions can make to processes of institutional choice. This focus highlights the important role that democracy plays, not in achieving consensus or commonality, but rather in addressing conflicts. Indeed, the book suggest that democratic politics is perhaps best seen less as a way of reaching consensus or agreement than as a way of structuring the terms of persistent disagreement.

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