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The U.S. Department of Treasury has announced plans to revive its buyback program after more than two decades. We estimate the effects of the 2000-2002 Treasury Buyback program on Treasury returns and the Federal Reserve's System Open Market Account (SOMA) portfolio. The reduction in supply from the buybacks had significant effects on both the bonds purchased by the buybacks and bonds with similar remaining maturity. Changes in supply contributed about 90 basis points to price returns over the course of the program -- nearly 1/5 of the overall change in prices. At a higher frequency, prices of purchased bonds and their near substitutes tended to change on settlement dates, not auction dates. We find that the Fed's holdings of individual securities were largely unaffected over the course of the buyback program. This is consistent with the Fed attempting to avoid exacerbating supply shortages in Treasury markets.
Struby, Ethan and Connolly, Michael F., "Treasury Buybacks, the Fed's Portfolio, and Local Supply" (2023). Department of Economics Working Paper Series. 20.