Reports Summarize Investment Study Results from Carleton College (Treasury Buybacks, the Federal Reserve’s Portfolio, and Changes In Local Supply): Investment

Economics Daily Report

2024 NOV 04 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Researchers detail new data in Investment. According to news reporting originating in Northfield, Minnesota, by NewsRx journalists, research stated, “We document spillover effects of the 2000-2002 Treasury Buyback program on Treasury returns and the composition of the Federal Reserve’s System Open Market Account (SOMA) portfolio. The reduction in bond supply due to the buybacks contributed an average of 95 basis points to the yields of bonds bought back and bonds of similar maturity over the course of the program.”

Financial support for this research came from Western Economic Association International.

The news reporters obtained a quote from the research from Carleton College, “Each $10 billion of purchases corresponded with an average yield increase of 7.8 basis points. At a higher frequency, prices of purchased and near substitute bonds increased on settlement dates. Changes to the SOMA portfolio were smaller for securities exposed to the buybacks and tended to occur outside of auction weeks, consistent with the Federal Reserve attempting to avoid exacerbating Treasury supply shortages. We relate our findings to the theoretical literature on asset supply in preferred habitats models of the term structure.”

According to the news reporters, the research concluded: “Our results suggest that the proposed reintroduction of the Treasury buyback program will have limited effects due to its size and proposed composition.”

This research has been peer-reviewed.

For more information on this research see: Treasury Buybacks, the Federal Reserve’s Portfolio, and Changes In Local Supply. Journal of Banking & Finance, 2024;168. Journal of Banking & Finance can be contacted at: Elsevier, Radarweg 29, 1043 Nx Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Journal of Banking & Finance - http://www.journals.elsevier.com/journal-of-banking-and-finance/)

Our news correspondents report that additional information may be obtained by contacting Ethan Struby, Carleton College, Dept. of Economics, Northfield, MN 55057, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jbankfin.2024.107286. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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