These securities include direct obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Purchases of agency debt securities increase the quantity of reserve balances in the banking system; sales or maturities of agency debt securities reduce those balances. These transactions, which are conducted by the New York Fed's Open Market Trading Desk (the Desk), are executed with primary dealers.
The Desk's purchases of agency debt securities occurred between 2009 and 2010 as part of the FOMC's broader effort to execute large-scale asset purchase programs to ease monetary policy. The aim of these purchases–combined with the purchases of mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae announced on November 25, 2008–was to put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Federal Reserve first purchased agency debt in 1971 and ended all purchases in the early 1990s. The Desk also purchased agency discount notes for a short period in 2008.
The New York Fed is authorized to reinvest the principal payments from agency debt and agency MBS holdings in the SOMA portfolio by investing in newly-issued MBS securities as directed by the FOMC. Details of the current SOMA portfolio management strategy for managing holdings of agency debt are outlined in the most recent operating policy statement.
The New York Fed also provides limited transaction services, including the purchases and sales of agency debt, to its official sector account holders. These include about 200 central banks, governments, and official institutions, many of whom do not have in-house capacity to conduct trading activity in the agency debt market.