Fed’s Treasury Holdings Are Historically Low: Chart of the Day

The Federal Reserve will have a relatively small holding of Treasury securities even after its second round of bond buying concludes, according to Carl Lantz, Credit Suisse AG’s head of U.S. interest-rate strategy.

The CHART OF THE DAY tracks the Fed’s investment in Treasuries as a percentage of debt held by the public, based on a Credit Suisse analysis of government data. The chart compares the March 31 percentage with year-end figures since 1919.

March’s level, 14.1 percent, was lower than the figures at the end of 2000 through 2007. The highest reading during this period was 18.4 percent, posted in 2002. The peak for the past nine decades was 28.4 percent at the end of 1973, when the U.S. was in a recession.

“The Fed holds a historically low share of government debt,” Lantz wrote in an April 15 report with a similar chart. The ratio is poised to decline to 11.9 percent by 2013, assuming the central bank leaves its Treasury holdings stable, he wrote.

Lantz’s report sought to debunk “myths” surrounding the Fed’s bond purchases, or quantitative easing, and the Treasury market. They include the myth that the central bank’s share of the market is unprecedented.

At the end of March, the Fed owned $1.3 trillion of Treasury bills, notes and bonds. Debt held by the public, a figure that excludes the holdings of government trust funds, totaled $9.5 trillion.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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