Fed Purchases $2.708 Billion of U.S. Treasuries in Reinvestment Program

The Federal Reserve bought $2.708 billion of Treasuries as part of a program to reinvest principal payments on its mortgage holdings to prevent money from being drained out of the financial system.

The Fed acquired 11 of the 25 Treasuries listed for possible purchase. The securities mature from August 2014 to July 2016, the New York Fed said in a statement today.

The Fed has bought $12.893 billion of Treasuries since it began the program on Aug. 17. Policy makers are seeking to keep holdings in the System Open Market Account, or SOMA, at about $2.054 trillion by using the proceeds of principal payments from its agency mortgage-backed securities and agency debt.

The Fed maintains a 35 percent per security limit of the amount outstanding for each specific Treasury it holds in the account. The central bank makes the securities available for loan to dealers against Treasury general collateral on an overnight basis. Dealers bid in a multiple-price auction held every day at noon New York time through its securities lending program.

To contact the reporter on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net

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