🇺🇸🇺🇸🇺🇸Did the Federal Reserve just buy 20 billion dollars in 3-year bonds? Does this mean that quantitative easing and money printing have begun?
Let me explain: the Federal Reserve is reinvesting, not printing.
The Treasury bond auction on May 5 saw something interesting:
20.470 billion dollars purchased by SOMA. People are asking: "Did the Federal Reserve just start quantitative easing again?"
Let's break it down.
What is SOMA?
SOMA = System Open Market Account. It is the Federal Reserve's portfolio of U.S. Treasury securities and agencies.
Managed by the Federal Reserve Bank of New York, it is used to implement monetary policy.
Why did SOMA buy in this auction?
These are reinvestment purchases, not quantitative easing.
When bonds mature in the Federal Reserve's SOMA account, it reinvests the cash into new Treasury securities to maintain its size.
Important:
SOMA purchases are:
Pre-programmed.
Non-competitive (do not affect prices).
Do not inject "new money" like quantitative easing.
So these 20.470 billion dollars are just maintenance, not stimulus.
Total auction:
168.700 billion dollars were bid.
78.500 billion dollars accepted.
Of which SOMA = 20.470 billion dollars (Fed).
The rest went to public investors such as dealers, funds, etc.
In summary:
SOMA purchases do not mean quantitative easing.
They are like renewing your fixed deposit: they do not spend new cash, just maintain the live balance.