From the FOMC statement last week (June 20, 2012):
“In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
Late 2014 is about two and a half years from now, and this date is unchanged from the April FOMC statement. What has change is the end date of the maturity extension program:
“The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less.”
Contrast this with the original program announcement in the September 2011 FOMC statement from last year:
The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.
The range of securities being purchased and sold has not change, though there are certainly fewer 3 years or less Treasury being own by the Federal Reserve than there were in September of last year given the $400 million sale of short Treasuries. From the Federal Reserve’s H.4.1 Release (data: here), there appears to be enough Treasury holding in the 1-5 years range for the program to go on. Table 1 below shows the Federal Reserve’s holding for end of September 2011 and middle of June 2012. However, I would need more data to break out the 1-5 years to see how many 3 years or less Treasuries are remaining as of now.
Table 1. Federal Reserve’s Treasury Holding by Maturity (in millions of dollars)
| Total | <15 days | 16-90 days | 91 days - 1 year | 1-5 years | 5-10 years | > 10 years | |
| 9/28/2011 | 1,664,655 | 15,909 | 22,877 | 129,112 | 714,534 | 583,690 | 198,533 |
| 6/20/2012 | 1,663,577 | 13,148 | 19,881 | 21,354 | 532,988 | 745,173 | 331,032 |
| Difference | (1,078) | (2,761) | (2,996) | (107,758) | (181,546) | 161,483 | 132,499 |
The table shows that from the end of September 2011 to now, the Federal Reserve’s Treasury holding has fallen in the short end. Note that the numbers for each row are holding of securities with remaining maturity as of that date. Those securities that are now 91 days to 1 years from maturity would have been 1 years to 1.75 years from maturity at September of last year. Also, the drop in the 91 days to 5 years is similar in magnitude in the rise in the 5-30 years – that is a goal of the maturity extension program to keep the reserve stable.
The stated goal of the FOMC actions is:
“This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative.”
The constant maturity yield curve from the Treasury website between the day before the FOMC announcement to June 26 shows some moderate fall in yield for much of the yield curve.
