Fed announces it will buy $35 billion in MBS Reinvestment Program in next month for total purchases of $85 billion

The NY Fed today published its statement of intended MBS purchases for the next month under the MBS Reinvestment Program. It plans to purchase a total of $35 billion in MBS from Primary Dealers. That’s $6 billion more than last month. It will bring the total of cash injected into Primary Dealer accounts for the month to $85 billion.

The MBS purchases are forward contracts normally with a 30 to 60 day settlement.

The Fed will publish the results of its purchases of the past month tomorrow. That will show the schedule of settlements for purchases made in the past month including purchases made under the new QE3 program. The first of the the new combined QE3 and MBS Reinvestment Program settlements, totaling $26.5 billion will come tomorrow. An additional $18.3 billion will settle next week. These purchases add funds to Primary Dealer accounts. They are the conduit for the transmission of monetary policy into the banking system.

Between the new QE3 purchases scheduled at $40 billion per month, the MBS reinvestment program at $35 billion for this month, and the $10 billion more in Treasuries that the Fed will purchase from Primary Dealers than it will sell to them in November under Operation Twist, the Fed will cash out the Primary Dealers to the tune of $85 billion this month. That’s the largest monthly amount of market boosting fuel since QE2 in the first half of 2011.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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