Our website will undergo scheduled maintenance on March 6th, 2024. During this time, connection to our website and some of its features may be unavailable. Thank you for your patience, and we apologize for any inconvenience.

Report

The Federal Reserve’s Market Functioning Purchases


Abstract: In March 2020, massive customer selling of U.S. Treasury securities and agency mortgage-backed securities (MBS) triggered by the COVID-19 pandemic overwhelmed dealers’ capacity to intermediate trades, contributing to a marked deterioration of market functioning. The Federal Reserve promptly took numerous steps to address the market disruptions, including the initiation of market functioning purchases of Treasury securities and agency MBS. Purchases quickly expanded to over $100 billion per day as the Fed announced plans to buy securities “in the amounts needed” to support market functioning and the effective transmission of monetary policy. Market liquidity improved steadily after mid-March, suggesting that the Fed’s efforts were effective, and the security purchases were scaled back accordingly.

Keywords: Federal Reserve; asset purchases; Treasury securities; agency mortgage-backed securities; COVID-19;

JEL Classification: E52; G01; G12; E44;

Access Documents

File(s): File format is application/pdf https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr998.pdf
Description: Full text

File(s): File format is text/html https://www.newyorkfed.org/research/staff_reports/sr998.html
Description: Summary

Authors

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2021-12-01

Number: 998