Reprinted with permission from EconomicPolicyJournal.com
Bank of America’s Jeffrey Rosenberg estimates that $340 billion of the Fed’s $2 trillion portfolio will roll off off the Fed’s System Open Market Account portfolio over the next twelve months, including $62.4 billion in Treasury debt and $46.9 billion in Agency (Freddie/Fannie) debt. However, for purposes of determining effects on future open market operations — when the Federal Reserve Bank of New York transacts with its eighteen primary dealers — this is a bit misleading.
The Fed is already authorized by the Federal Reserve Act to replace maturing issues by purchasing directly from the issuer. In fact, the Fed stated:
On August 10, 2010, the Federal Open Market Committee directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities (agency MBS) in longer-term Treasury securities.