Fed Again Tapers Daily Treasury Purchases To $4 Billion Per Day For Next Week

From an initial $75 billion per day when the Fed announced the launch of Unlimited QE in mid-March, the US central bank first reduced its daily buying to $60 billion per day, then announced a series of consecutive 'tapers' as follows:

  • $50 billion per day for April 6-9
  • $30 billion per day for April 13-17
  • $15 billion per day for April 20-24
  • $10 billion per day for April 27-May 1
  • $8 billion per day for May 4-May 8
  • $7 billion per day for May 11-May 15
  • $6 billion per day for May 18-May 22
  • $5 billion per day for May 25-May 29

Then, after again shrinking the average daily POMO to $4.5 billion for the week of June 1-June 5,  in its latest just published schedule, the Fed unveiled that in the coming week it would purchase "only" $4BN per day, or a total of $20BN for the week, the lowest weekly total since the launch of Unlimited QE on March 23.

The Fed continues the practice of incremental tapering, and providing a weekly preview of its purchasing operations, which in the coming week will amount to just $20BN in TSYs, down $2.5BN from the current week.

At the same time as it continues to shrink its TSY purchases, for the third week in a row the Fed decided not to taper its daily MBS buying, which will average $4.5 billion per day next week, the same as last week, and now above the buying of Treasuries for the coming week. Also, the coming week's MBS POMO schedule is identical to last week's:

  • Mon: $4.47BN vs $4.47BN
  • Tue: $4.545BN vs $4.545BN
  • Wed: $4.47BN vs $4.47BN
  • Thur: $4.545BN vs $4.545BN
  • Fri: $4.47BN vs $4.47BN

The chart below summarizes all the Fed Treasury and MBS buying completed and scheduled since the relaunch of QE on March 13:

In aggregate, the Fed will buy a total of $42.5 billion of TSYs/MBS next week and ever closer to spark concerns that the Fed is no longer monetizing all the Treasury issuance, of which there is and will be trillions in the coming quarters.

And while yields did not react to the latest POMO schedule, after weeks of trading in the mid-0.60% range, today we have finally seen some movement in the 10Y shich was last trading around 0.92%, with bond buyers set to become much more curious if and when the Fed will either launch more QE or announce Yield Curve Control at next week's FOMC meeting.