Hi Tim,

Below is a link to the Fed's Monetary Policy Report from June that explains that the Fed purchased (and plans to purchase more) Treasuries and MBS in response to investors dumping longer-term bonds, which raised yields above their desired levels. Hope this helps!

https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-part2.htm

Dave

David Zalewski
Professor (Retired) - Department of Finance 
School of Business
Providence College
Ryan Center 252
Providence, RI 02918

From: AFEEMAIL Discussion List <[log in to unmask]> on behalf of William Van Lear <[log in to unmask]>
Sent: Tuesday, October 13, 2020 3:36 PM
To: [log in to unmask] <[log in to unmask]>
Subject: [External] Re: [AFEEMAIL] [E] Treasury Balances at the FED
 
Hi Tim,

The govt is spending an increased amount of $s beyond tax intake, necessitating increased borrowing, and yes, by increasing the availability of govt securities, the private sector has more default free securities to hold. I think the increase in the Treasury balances is due to spending delays and fewer firms taking advantage of govt relief efforts.

Dr. William Van Lear
Professor Emeritus
Economics Department
Belmont Abbey College



On Tue, Oct 13, 2020 at 12:19 PM Wunder, Tim <[log in to unmask]> wrote:
Quick question, if anybody knows, why has the US treasury balances at the FED gone from averaging 380 billion to 1.7 trillion this year?  Is the US government intentionally floating bonds to give the markets investment quality debts?


Timothy A Wunder

Clinical Professor of Economics

Department of Economics





 

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