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"The Fed purchases are still in the early stages. At this point
we are monitoring how the purchase program may evolve and any
effects on the market," a Treasury official said as the agency
released its latest quarterly plan to fund the federal
government. "It would be premature to draw any conclusions at
this point."
The official also said Treasury was taking a "proactive
approach" to look at future government financing and was
exploring a range of new products including one linked to the
new Secured Overnight Financing Rate (SOFR) that is set to
become a reference for the financial industry, as well as
20-year and 50-year bonds.
The Fed earlier this month announced that it allow its asset
holdings to expand for the next few month with regular purchases
of short-term Treasury securities.
Unlike earlier Fed asset purchases, officials said the aim was
not to impact long-term interest rates or encourage economic
activity, but to ensure financial markets had an adequate supply
of reserves to function smoothly, and that the Fed could keep
control of its target overnight interest rate.
The Fed's entry into the market for Treasury bills, however,
could change the demand for other types of securities and
potentially influence the Treasury's funding strategies.
In laying out its plans for refunding $60.5 billion in maturing
debt and raising $23.5 billion in new cash, the department said
in a press release there were no plans to change the supply of
bills beyond what was currently expected.
The supply of bills may increase somewhat through the end of
November, "consistent with historical patterns," but by the end
of the year and through January 2020 it "is expected to be
comparable to current levels," Treasury said in the statement.
(Reporting by Howard Schneider; Editing by Paul Simao)
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