The US Federal Reserve bought US$7.541B of Treasuries in its second outright purchase of U.S. government debt in three days as part of the central bank’s efforts to lower consumer borrowing rates. The majority of the purchase was US$5.625B of the 1.375B note due March 15, 2012, that was issued this month. Seven of the 18 securities maturing from April 2011 through April 2012 listed for possible acquisition were bought, according to the Federal Reserve Bank of New York Web site. Central banks in the US, UK and Japan are buying government debt in the latest step to broaden efforts to unfreeze credit and end the recession after cutting benchmark interest rates close to zero.
The Fed bought US$7.5B in debt on March 25, the first purchase since the early 1960s by the central bank under a US$300B plan announced March 18. “The Fed’s monetization of government borrowing is in economic terms a hugely powerful liquidity tool,” said Lena Komileva, head of Group of Seven market economics in London at Tullett Prebon Plc, the world’s second-largest interdealer broker. “It also helps to address investor fears, by depressing government yields and private sector borrowing costs and signaling a firm commitment by the Fed to keep monetary liquidity flowing for a long time.”
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