Discussion Paper

Sizing Up the Fed's Maturity Extension Program

Abstract: The Federal Open Market Committee (FOMC) recently announced its intention to extend the average maturity of its holdings of securities by purchasing $400 billion of Treasury securities with remaining maturities of six years to thirty years and selling an equal amount of Treasury securities with remaining maturities of three years or less. The nominal size of this maturity extension program, at $400 billion, is smaller than the $600 billion of purchases during the second round of large-scale asset purchases (LSAP 2) completed in June 2011. The two programs are more comparable in size, however, once we consider the characteristics of the securities expected to be purchased and sold under the maturity extension program. In this post, we explain what this means and why it matters.

Keywords: Large Scale Asset Purchases; Duration; 10-year equivalents; Maturity Extension Program; portfolio balance channel;

JEL Classification: G1;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2011-10-19

Number: 20111019