> I don't know what the current policy is, but the
>Fed certainly has intervened in the past at different
>points of the yield curve. What comes to my mind is
>the famous "twist" policy during the Kennedy administration
>when for some period of time the Fed was selling short
>term securities to raise short term rates in an effort to
>support the dollar against speculative attacks while
>buying long term securities to push down longer term
>rates in order to spur investment and growth.
As it happens, the April issue of the Federal Reserve Bulletin whose tables I was citing yesterday has a review of 1998 open market operations. It says, "As in 1997, the overall expansion of the domestic portfolio [of the System Open Market Account (SOMA)] in 1998 was in holdings of Treasury coupon securities. The declining share of short-term Treasury bills held in the portfolio increased the average maturity of all Treasury issues in the SOMA at year end to forty-seven months, compared with forty-three months at year-end 1997. At the end of 1998, 14 percent of the volume of all outstanding marketable Treasury debt was held in the SOMA portfolio, up a bit from 13 percent one year earlier."
A table shows (selections from their selected years only):
WEIGHTED AVERAGE MATURITY OF MARKETABLE TREASURY DEBT (MONTHS)
SOMA all outstanding debt 1960 19 55 1970 24 40 1980 55 48 1985 49 59 1990 41 68 1995 39 63 1996 41 63 1997 43 65 1998 47 68
According to Ann-Marie Meulendyke's classic page-turner, U.S. Monetary Policy and Financial Markets (FRBNY, 1989): "The Federal Reserve prefers to have a portfolio that contains the full range of maturities.... To some extent, the decision to buy bills or coupon issues will be affected by market availabilities of different types of issues.... The desk is, nonetheless, conscious of the greater liquidity normally present in the bill market..."
Doug