U.S. Fed holdings of treasuries drop as its balance sheet runoff would end sooner

Source: Xinhua| 2019-08-02 16:25:03|Editor: Wu Qin
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WASHINGTON, Aug. 1 (Xinhua) -- Data released by the U.S. Federal Reserve (Fed) on Thursday showed that the central bank lowered its holdings of U.S. Treasuries and Mortgage Backed Securities.

For the week ending July 31, the average daily figure of Fed holdings of U.S. Treasury securities dropped 1,814 million U.S. dollars to 2,092,212 million dollars.

The majority of U.S. Treasury securities that the Fed holds were longer term securities issued by the U.S. government like Treasury notes and Treasury bonds, which totaled 1,952,410 million dollars, according to the Fed.

The U.S. Federal Reserve purchased government-issued securities and other securities like Mortgage-backed securities (MBS) from the market in order to boost the money supply and encourage lending and investment after the 2008 financial crisis.

The unconventional monetary policy, commonly known as "Quantitative Easing," left the central bank with a massive holding of securities.

Meanwhile, the data also showed that the central bank was lowering its holding of the MBS. The average daily figure of MBS holdings dropped 13,021 million dollars to 1,511,775 million dollars for the week ending July 31.

The Fed's effort to lower the holdings of U.S. Treasuries and MBS aimed at shrinking Fed's holdings of these assets to its pre-crisis level. However, the central bank said it would end the effort on August 1 in advance after concluding a two day policy meeting on Wednesday.

In March, the Fed stated that it intends to conclude the reduction of its aggregate securities holdings at the end of September. The process, known as Balance Sheet Normalization, started in October 2017.