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.

Click here to try the Professional Edition for 30 days risk free.

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.

Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and begin your risk free trial NOW!

Follow my comments on the markets and economy in real time @Lee_Adler on Twitter!

Find this report useful? Support The Wall Street Examiner’s research by donating via Paypal!

Even better, subscribe to the Wall Street Examiner Professional Edition.

Share!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

The Wall Street Examiner Professional Edition keeps track of the machinations of the Fed, Primary Dealers, the US Treasury, other central banks and a whole cast of market actors as they drive the markets. Try the Professional Edition risk free for 30 days!