Operating Policy
Statement Regarding Agency Mortgage-Backed Securities Small Value Exercise
January 5, 2015

The Federal Reserve Bank of New York’s Open Market Trading Desk (the Desk) will conduct small value agency mortgage-backed securities (MBS) sales operations over FedTrade, its proprietary trading platform. The small value exercise is a matter of prudent advance planning by the Federal Reserve and is being conducted under the annual authorization for domestic open market operations for the purpose of testing operational readiness.1 These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.

The Desk will conduct an exercise consisting of a series of small value sale operations of agency MBS via FedTrade, the first of which will occur on Thursday, January 8, 2015. The exercise will take place over a period of a few weeks and the total current face value of sales across all operations will not exceed $500 million. The sales operations conducted as part of this exercise will not be offset by the Desk’s agency MBS reinvestment purchases of principal payments from the Federal Reserve’s holdings of agency debt and agency MBS that the Desk has been conducting at the direction of the Federal Open Market Committee.

The Desk will pre-announce each small value agency MBS operation at least one business day in advance of that operation on the Federal Reserve Bank of New York’s website. In addition, announcements and results will be posted at the start and following the completion of each operation. The results will include the security types, total amounts accepted and submitted, settlement months, and other details. The decline in agency MBS holdings associated with the exercise will be reflected in Table 1 of the Federal Reserve's H.4.1 statistical release under factors supplying reserves, commitments to buy and sell will be included in Table 3, and the remaining holdings will be included as securities in Table 2 and assets in Tables 5 and 6.

1 See paragraph two of the authorization for domestic open market operations at http://www.federalreserve.gov/monetarypolicy/fomcminutes20140129.htm.