Before the global financial crisis, the Fed operated within a so-called “limited reserves” framework. Banks tried to maintain only reserve requirements, borrowed federal funds on the market when they were a little short, and loans when they had a little more money. The Fed targeted the interest rate in this market and added or emptied reserves when it wanted to defer interest on the funds. Mr. Robinhood. “What are the near and far legs in a buyout contract?” Access on August 14, 2020. A pension contract (repo) is a short-term guaranteed credit: one party sells securities to another and agrees to buy them back at a higher price at a later price. The securities serve as collateral. The difference between the initial price of the securities and their redemption price is that of the interest paid on the loan called the pension rate.
In October 2017, the FOMC launched a balance sheet standardization program that gradually reduced the size of these holdings by reducing the reinvestment of von Sichier on securities held in SOMA6. These ceilings, which limited monthly net withdrawals of maturing securities, were maintained, while the FOMC reduced all of its securities portfolios, resulting in these outstandings gradually and predictably decreasing. Initially, the decline in SOMA securities was limited to $6 billion per month for government bonds and $4 billion per month for agency debt and MBS between October 2017 and December 2017. In 2018, these ceilings gradually increased to a maximum of $30 billion per month for treasury bills and $20 billion per month for agency debt and MBS. In March 2019, the FOMC announced its intention to slow down the reduction of its treasury holdings by reducing the ceiling on monthly repayments to $15 billion from May 2019 and intends to complete the reduction in the total stock of its securities at SOMA at the end of September 2019. In July 2019, the FOMC announced that it would finalize this reduction in its securities portfolios two months earlier than planned. In addition, the FOMC intends to further reduce its outstanding debts of agencies and the MBS agency, which corresponds to the objective of holding mainly government bonds in the long term. From August 2019, repayments received by the agency`s debts and MBS agency will be reinvested in treasury securities subject to a ceiling of $20 billion per month; all major payments above this limit are always reinvested in the MBS agency.