Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

The 2013 Federal Reserve’s System Open Market Account (SOMA) Annual Report in a Historical Context

admin by admin
April 17, 2014
in Uncategorized
0
0
SHARES
94
VIEWS
Share on FacebookShare on Twitter

by Alyssa Cambron, Michael Fleming, Deborah Leonard, Grant Long, and Julie Remache – Liberty Street Economics, Federal Reserve Bank of New York

In August 2013, we wrote a series of blog posts on the use of the Federal Reserve’s System Open Market Account (SOMA) portfolio in monetary policy operations. Since the onset of the financial crisis, the Federal Open Market Committee (FOMC) has increased the size and adjusted the composition of the SOMA portfolio in efforts to promote the Committee’s mandate to foster maximum employment and price stability. Over time, these actions have also generated high levels of portfolio income, contributing in turn to elevated remittances to the U.S. Treasury.

Today’s release of the New York Fed’s report Domestic Open Market Operations during 2013 offers an opportunity to update our blog series’ discussion of the portfolio’s income and unrealized gains and losses, and to revisit our counterfactual exercise exploring how the use of the portfolio to implement monetary policy has affected income.

In “What If? A Counterfactual SOMA Portfolio,” we estimated the portfolio and income effects of the FOMC’s actions compared with a scenario in which the Fed responded to the financial crisis and slow subsequent recovery only by lowering the federal funds target. In order to reflect developments over the past year, we have updated this analysis. The new “baseline” scenario is the baseline in the report released today, which reflects actual balance sheet developments and market prices through December 31, 2013, and projected portfolio and interest rate paths based on results from the Desk’s January 2014 Survey of Primary Dealers. Over the past year, dealers’ median expectation for additional asset purchases (starting from January 2013) increased by $360 billion to an estimated total of $1.47 trillion, compared with prior expectations for about $1.1 trillion in total purchases. Moreover, dealers have pushed back the expected end date for asset purchases from early 2014 to late 2014, and they have pushed back the time when they expect the FOMC to start raising the federal funds target rate one quarter, to the fourth quarter of 2015. In line with the “buy-and-hold” scenario described in the addendum to our original post, we assume no assets are sold during the normalization process, consistent with discussions at the June 2013 FOMC meeting. The “counterfactual” scenario was also updated with historical interest rates for 2013 and the same subsequent projected interest rate path as used in the baseline.

The realized and projected portfolio and income effects associated with this new information can be seen in the charts below. Under the counterfactual scenario, we estimate that total SOMA domestic securities holdings as of year-end 2013 are $1.3 trillion, roughly $2.5 trillion lower than the realized level of $3.8 trillion as of year-end 2013. Meanwhile, the larger and longer-lasting projected purchase program relative to our 2012 estimates lifts the projected peak size of the portfolio to a level of $4.2 trillion and maintains a larger portfolio during the longer reinvestment period associated with a later liftoff date. Compared with the 2012 “buy-and-hold” scenario, it also pushes out by over a year the date when the size of the portfolio is normalized, at which time Treasury purchases resume in line with trend currency growth and the baseline converges with the counterfactual.

Projected-SOMA-Holdings-2008-25

SOMA-Portfolio-Net-Income-2008-25

The larger portfolio in the updated baseline is also projected to generate higher levels of SOMA net income in the near to medium term than we projected in our exercise a year ago. Cumulative net income from 2008 through 2025 is $350 billion more in the current baseline than in the counterfactual scenario, on net $55 billion higher. All else equal, higher portfolio net income boosts remittances to the Treasury. These findings are consistent with those of a recent research note by our colleagues at the Federal Reserve Bank of San Francisco, who conducted a stress test analysis of SOMA holdings. They found a high likelihood of a positive cumulative effect on net income and remittances from the Federal Reserve’s large-scale asset purchase programs relative to the pre-crisis historical trend.

Total-Portfolio-Unrealized-Gains-and-Losses

In “A History of SOMA Income,” another post from our 2013 series, we provided historical perspective on the portfolio’s income and market value. In today’s release, we show that realized net income from the SOMA portfolio was $84 billion in 2013, contributing to almost $78 billion of remittances to the Treasury last year. (Remittances are, of course, not the only means by which monetary policy influences the economy, and the fiscal implications of monetary policy must be considered in a broader context.) As we illustrated in that earlier post, this level of income is high by historical standards, and the realized numbers for 2013 are slightly higher than originally forecast in the projections described earlier in this post. The 2013 post also discussed how the market value of the SOMA portfolio—and therefore the related unrealized gains and losses—fluctuates with changes in interest rates. Today’s release shows how unrealized gains, defined as the difference between the market value of the portfolio and its accounting or book value (which reflects amortized cost), declined over the course of 2013. The sharp rise in longer-term interest rates in 2013 led to a decrease in the market value of the portfolio and resulted in the portfolio carrying an unrealized loss of about $53 billion at year-end, compared with an unrealized gain of about $215 billion at the end of 2012. While the fluctuations in interest rates were not anticipated by the market, the sensitivity of the portfolio’s valuation to such moves was a predictable result of the interest rate risk that’s been absorbed by the SOMA portfolio from the market through large-scale asset purchases. This reflects one of the channels through which such purchases are believed to ease financial conditions. Overall, the level of unrealized losses at the end of 2013 as a percentage of the portfolio is still quite low, especially in comparison with the early 1980s when interest rates were high and volatile. Moreover, unrealized losses have no effect on actual income unless the assets are sold from the portfolio.

Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Source: http://libertystreeteconomics.newyorkfed.org/2014/04/just-released-the-2013-soma-annual-report-in-a-historical-context.html#.U1AbbfldVio


About the Authors

Cambron_alyssaAlyssa Cambron is a quantitative policy/analysis associate in the Federal Reserve Bank of New York’s Markets Group.

Fleming_michaelMichael Fleming is a vice president in the Bank’s Research and Statistics Group.

Deborah Leonard is a vice president in the Markets Group.

Long_grantGrant Long is a quantitative policy/analysis associate in the Markets Group.

Remache_julieJulie Remache is a vice president in the Markets Group.

Previous Post

Pyramid Scheme Targeting Dominican and Brazilian Immigrants

Next Post

Cooperation, Conflict, and the Emergence of a Modern Federal Reserve

Related Posts

Unlock the Future of Fashion with NFTs and Wearables
Business

Unlock the Future of Fashion with NFTs and Wearables

by John Wanguba
May 27, 2023
Are Bitcoin Casinos Legal?
Business

Are Bitcoin Casinos Legal?

by John Wanguba
May 26, 2023
What Are Deposit Tokens?
Economics

What Are Deposit Tokens?

by John Wanguba
May 22, 2023
If The Stock Market Crashes, What Will Happen To Bitcoin?
Finance

If The Stock Market Crashes, What Will Happen To Bitcoin?

by John Wanguba
May 20, 2023
Who Will Win XRP vs SEC Case?
Econ Intersect News

Who Will Win XRP vs SEC Case?

by John Wanguba
May 20, 2023
Next Post

Cooperation, Conflict, and the Emergence of a Modern Federal Reserve

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Unlock the Future of Fashion with NFTs and Wearables
  • Are Bitcoin Casinos Legal?
  • What Are Deposit Tokens?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish