Back to Square One: Feb Buys $2.55B In Treasuries To Stabilize and Prevent Drain in Financial System

It is August 2010... Deja vu, back to square one, back to the past. Whichever way you look at it, it's a nother sign that not all is well with the economy, in spite of what the financial media says.

Bloomberg reports today that the Federal Reserve bought $2.551 billion of Treasuries "in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system".

The Fed actually bought more than half of the securities listed for possible purchase, 14 out of 25 (56%), notes which mature from August 2014 to February 2016,

"The Fed plans to keep holdings in the System Open Market Account, or SOMA, at about $2.054 trillion, the amount it held on Aug. 4, by using the proceeds from maturing mortgage-backed securities to buy Treasuries. The purchases are the Fed’s first attempt to bolster the economy in more than a year".

"The purchases should average about $2 billion per operation, according to Wrightson ICAP, a Jersey City, New Jersey-based research unit of ICAP Plc that specializes in U.S. government finance".

QE II?

“By maintaining the SOMA portfolio at the same level, the Fed will stem the gradual ‘quantitative tightening’ that would otherwise occur, while also furthering its goal of moving toward a Treasury-only portfolio,” said JPMorgan Chase & Co. strategists “On the face of it, this change seems minor, and almost operational in nature. However, it is not insignificant. JPMorgan Chase strategists estimated the Fed will buy about $284 billion in Treasuries during the next year, or more than the combined purchases of Japan and China during the year ended May".