<blockquote>
<p>Why can't the Treasury and the Federal Reserve agree upon a controlled issuance and instant procurement of UST bonds &quot;straight from the printing press&quot;?</p>
</blockquote>
<p>Treasury bonds are not “printed” at a “printing press,” the only “printing press” is run by the U.S. Mint, where they print Federal Reserve Notes (e.g., dollar bills). Treasury Bonds/Notes/Bills are sold at auction.</p>
<p>Not sure of the exact statute that forces this, but the Federal Reserve does not bid at auction, they buy in the secondary market. This answers your question.</p>
<p>Update: a FAQ on the Fed website: <a href="https://www.federalreserve.gov/faqs/money_12851.htm" rel="nofollow noreferrer">link.</a></p>
<blockquote>
<p>Why subject the market to the ambiguity ...</p>
</blockquote>
<p>Because there is no legal alternative, other than changing Fed operating procedures to having them cap bond yields. (One can search for discussions of “yield curve control” for more details.)</p>
<p>As for financial market commentary, it is not always reliable, so statements made there need to be taken with a large grain of salt.</p>

CC BY-SA 4.0
2021-01-14T16:15:56.113Z
"the Federal Reserve does not bid at auction, they buy in the secondary market." - this is an incredibly interesting piece of information. Thank you for that!
Tony Sepia
CC BY-SA 4.0
2021-01-14T16:35:03.870Z
@TonySepia I added in a link to a FAQ on the Fed website confirming my statement.
Brian Romanchuk
CC BY-SA 4.0
2021-01-14T17:01:13.813Z
Brian Romanchuk, you have an interesting blog on bond economics! As it relates to my question, could you please share a personal opinion on whether you think the open-market nature of the Fed's procurement of the Treasury securities could cause a shift of money from equity markets? I'm happy to post this as a separate question if that is suitable
Tony Sepia
CC BY-SA 4.0
2021-01-14T18:32:48.337Z
Thanks. For every buyer, there is a seller, which means we cannot really say that money shifts in/out of equity markets. Financial market commentary that suggests that has not been  thought through carefully.
Brian Romanchuk
CC BY-SA 4.0
2021-01-14T15:00:30.990Z
2021-01-14T16:34:13.247Z
2021-01-14T16:34:13.247Z
Brian Romanchuk
<p>Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to <a href="https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details#monthly-details" rel="nofollow noreferrer">absorb</a> new US Treasury Bonds issued in larger quantities to support the US government's growing budgetary requirements (i.e. the pandemic support of the economy).</p>
<p>This hypothesis is bolstered by <a href="https://www.thegreyfirehorse.com/post/banana-republic" rel="nofollow noreferrer">the example of 2018</a>:</p>
<blockquote>
<p>...real yields rose and stocks and corporate bonds got clobbered until
the FED reversed its tapering exercise and started buying USTs in
size.</p>
</blockquote>
<p>Questions:</p>
<ul>
<li>Why can't the Treasury and the Federal Reserve agree upon a
controlled issuance and instant procurement of UST bonds <em>&quot;straight
from the printing press&quot;</em>?</li>
<li>Why subject the market to the ambiguity of
being able to partake in this exercise, which is specifically aimed at funding
the budget through the Fed's resources?</li>
</ul>

<government-debt><central-banking><federal-reserve><bonds>
Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?
Tony Sepia
# Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?

(Asked by: username_0 on 2021-01-14)

Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to [absorb](https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details#monthly-details) new US Treasury Bonds issued in larger quantities to support the US government's growing budgetary requirements (i.e. the pandemic support of the economy).

This hypothesis is bolstered by [the example of 2018](https://www.thegreyfirehorse.com/post/banana-republic):

> ...real yields rose and stocks and corporate bonds got clobbered until
> the FED reversed its tapering exercise and started buying USTs in
> size.

Questions:

* Why can't the Treasury and the Federal Reserve agree upon a
  controlled issuance and instant procurement of UST bonds *"straight
  from the printing press"*?
* Why subject the market to the ambiguity of
  being able to partake in this exercise, which is specifically aimed at funding
  the budget through the Fed's resources?

**Tags:** government-debt, central-banking, federal-reserve, bonds


---

## 1 answers

### Answer by username_1 on 2021-01-14. Score: 1 | Accepted answer

> Why can't the Treasury and the Federal Reserve agree upon a controlled issuance and instant procurement of UST bonds "straight from the printing press"?

Treasury bonds are not “printed” at a “printing press,” the only “printing press” is run by the U.S. Mint, where they print Federal Reserve Notes (e.g., dollar bills). Treasury Bonds/Notes/Bills are sold at auction.

Not sure of the exact statute that forces this, but the Federal Reserve does not bid at auction, they buy in the secondary market. This answers your question.

Update: a FAQ on the Fed website: [link.](https://www.federalreserve.gov/faqs/money_12851.htm)

> Why subject the market to the ambiguity ...

Because there is no legal alternative, other than changing Fed operating procedures to having them cap bond yields. (One can search for discussions of “yield curve control” for more details.)

As for financial market commentary, it is not always reliable, so statements made there need to be taken with a large grain of salt.

> **Comments:**
> **username_0**: "the Federal Reserve does not bid at auction, they buy in the secondary market." - this is an incredibly interesting piece of information. Thank you for that!  
> **username_1**: @TonySepia I added in a link to a FAQ on the Fed website confirming my statement.  
> **username_0**: username_1, you have an interesting blog on bond economics! As it relates to my question, could you please share a personal opinion on whether you think the open-market nature of the Fed's procurement of the Treasury securities could cause a shift of money from equity markets? I'm happy to post this as a separate question if that is suitable  
> **username_1**: Thanks. For every buyer, there is a seller, which means we cannot really say that money shifts in/out of equity markets. Financial market commentary that suggests that has not been  thought through carefully.  

---

