the fomc has announced only the monthly pace and composition of purchases and noted that purchases will continue until there is a substantial improvement in the outlook for the labor market in the context of price stability. the committee has also indicated that it will take appropriate account of the likely efficacy and costs of its purchases when adjusting their size, pace, and composition. while noting that purchase activity will depend on these factors, the the fomc also directed the desk to reinstate its previous policy of rolling over maturing treasury holdings into new issues. see the desk ’ s frequently asked questions for more information. in practice, the amount of maturing proceeds will be quite small, since securities maturing within the next three years were sold as part of the mep this excludes about $ 100 billion of mbs trades scheduled to settle in the future. i would like to thank members of the markets group staff, including katherine femia, lorie logan, linsey molloy, roman shimonov, and nathaniel wuerffel, who contributed to the preparation of these remarks. bis central bankers ’ speeches committee has not specified the time at which purchases will be complete or the total expected size of the purchases. instead, under this conditional, outcome - based approach, the committee has enacted a policy that will adjust to incoming information about labor market conditions and the broader economy, as well as its ongoing assessment of the efficacy and costs of purchases. retaining the flexibility to adjust purchases is an important feature of the program, given our relatively limited experience with the use of the balance sheet as a monetary policy tool and the uncertainty about the policy ’ s effects. one of the potential costs of additional purchases is that they could disrupt functioning in treasury and mbs markets – a cost that the desk carefully assesses when it implements the fomc ’ s policy directive. as you know, there is a finite supply of treasury and agency securities available to purchase, in terms of both total amount and amounts available in the market at any given time. if the federal reserve were to become too dominant a buyer or holder, it could reduce the tradable supply of these securities and discourage trading among market participants, leading to diminished liquidity and price discovery. a significant deterioration in liquidity could lead investors to demand a premium for transacting in these markets, ultimately raising borrowing costs and undermining the program ’ s policy goal. 4 however, as discussed later, the purchases have gone smoothly so far, and market liquid

dollar roll contracts brings it forward. the desk actively monitors implied financing rates on dollar roll since tba transactions settle on a forward basis, the desk is exposed to the risk that a primary dealer is unable or unwilling to meet its contractual obligations. if a counterparty does not deliver on its obligation, the desk could be forced to replace the transaction at a higher prices. as a result of this risk, the desk requires primary dealers to post collateral, or margin, in response to changes in the market value of the security for example, in january, the desk decreased its purchases of 30 - year fixed - rate 3. 5 percent coupon mbs relative to projected issuance as a result of concerns about the near - term availability of this coupon for settlement and increased its purchases of 3 percent coupon mbs. bis central bankers ’ speeches contracts for the level of supply of the securities that the desk expects to be delivered. when implied financing rates reach levels notably below the general level of short - term interest rates, thereby signaling supply concerns, the desk sells dollar roll contracts to postpone settlement of that outstanding purchase. 12 our dollar roll activity is consistent with the guidelines laid out by the treasury market practices group ( tmpg ), an industry group sponsored by the federal reserve bank of new york. tmpg best practices encourage market participants who have amassed a particularly large position in the agency mbs market to manage that position mindful of the need to support market liquidity and to take care that sudden changes in trading strategies do not adversely impact liquidity or settlement. 13 the desk has consistently transacted in the dollar roll market when purchasing mbs to facilitate the orderly settlement of its purchases and will continue to do so as necessary to avoid deterioration in the liquidity of these contracts. 14 so far, there seems to be little evidence that the current pace of purchases is straining the market ’ s ability to deliver securities to us. the current monthly pace is within the range seen during the federal reserve ’ s previous asset purchase programs, whether measured in par terms or when adjusted for duration risk. treasury purchases make up only about 25 percent of monthly gross issuance of coupon securities, and current soma holdings are less than 20 percent of coupon treasuries outstanding, although in some maturity sectors these percentages are significantly larger. the fomc ’ s capacity to purchase mbs is somewhat more difficult to gauge, given the uncertainty around future mortgage origination discussed earlier. since the