Interesting chart from Bloomberg on how the Fed’s treasury holdings have changed under operation twist, or more formally, the Maturity Extension Program and Reinvestment Policy.
After the end of the month no more selling of the short end to buy long end. Just print and buy bonds, baby!
The Committee also will purchase longer-term sTreasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction.
– FOMC statement, December 12, 2012
That should finance a little less than half the Federal government’s 2013 budget deficit under the CBO’s Alternative Fiscal Scenario.
Welcome to the Totally Distorted Economy (TDE). More crack. The pressure builds.
(click here if chart is not observable)