In a meeting that concluded on May 1, 2024, the Federal Open Market Committee (FOMC) made the decision to slow down the reduction of its securities holdings, in line with its previously announced Plans for Reducing the Size of the Federal Reserve's Balance Sheet. The new measures will be implemented starting from June 1, 2024.

The FOMC directed the Open Market Trading Desk at the Federal Reserve Bank of New York to lower the cap on monthly Treasury redemptions to $25 billion. However, the cap on monthly agency debt and agency mortgage-backed securities (MBS) redemptions will remain unchanged at $35 billion.

Furthermore, the FOMC instructed the Desk to reinvest any principal payments received from agency debt and agency MBS holdings that exceed the monthly cap of $35 billion into Treasury securities.

The redemptions of Treasury securities each month will include both Treasury coupon securities and Treasury bills. If the maturing coupon securities fall below the monthly cap, Treasury bills will be included in the redemptions. To facilitate this process, the Desk will roll over at auction the amount of principal payments from System Open Market Account (SOMA) holdings of Treasury securities maturing during each calendar month that exceeds the cap amount for that month.

The allocation of rollover amounts for Treasury coupon securities will be based on proportionate total SOMA coupon maturities on each maturity date. Similarly, bill rollover amounts will be allocated based on proportionate total SOMA bill maturities on each maturity date. The rollovers will continue to be accomplished through non-competitive bids at Treasury auctions, with the allocation distributed across the securities being issued on each auction date based on their announced offering amounts.

In cases where paydowns on SOMA holdings of agency debt and agency MBS exceed the $35 billion redemption cap, the Desk will announce the monthly amount of Treasury secondary market reinvestment purchases. A tentative schedule of purchase operations will also be provided, usually on or around the ninth business day of each month. These secondary market purchases will be conducted over a one-month period until the next announcement.

Under this new guidance, the Desk plans to distribute secondary market Treasury reinvestment purchases across various types of securities, including nominal coupons, bills, Treasury Inflation-Protected Securities, and Floating Rate Notes. The goal will be to roughly match the maturity composition of outstanding securities.

It is worth noting that the Desk will continue to conduct regular small value purchases and sales of Treasury securities and agency MBS under its normal process for maintaining operational readiness, as announced in October 2022.

For more detailed information on Treasury rollovers, Treasury outright operations, and agency MBS operations, interested parties can refer to the specified locations.

With these adjustments in place, the Federal Reserve aims to maintain stability in the financial markets while carefully managing the reduction of its securities holdings.