Fed Tapers Daily Treasury Purchases To Just $4.5 Billion Per Day

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by Tyler Durden
Friday, May 29, 2020 - 03:03 PM

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
  • $30 billion per day
  • $15 billion per day
  • $10 billion per day
  • $8 billion per day
  • $7 billion per day
  • $6 billion per day

Then, after again shrinking the average daily POMO to $5 billion last week, in its latest just published schedule, the Fed unveiled that in the coming week it would purchase "only" $4.5BN per day, or a total of $22.5BN for the week.

The Fed is continuing the practice of incremental tapering, and providing a weekly preview of its purchasing operations, which in the coming week will amount to just $22.5BN in TSYs, up $2.5BN from the current week which however was one day short due to the Monday holiday.

Somewhat surprisingly, for the second 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 matches the buying of Treasuries for the :

  • Mon: $4.47BN vs no purchases on Monday's holiday
  • Tue: $4.545BN vs $4.23BN
  • Wed: $4.47BN vs $4.770BN
  • Thur: $4.4545BN vs $4.230BN
  • Fri: $4.47BN vs $4.770BN

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 $45 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 trillion in the coming quarters.

But not yet: once again there was no reaction in yields, with the 10Y trading at 0.66%, after the announcement, exactly where it was last week, and 2bps above where it was trading at exactly this time one week ago, and unchanged from 2 weeks ago.