By Sell Puts
Most Fed policy makers agreed that the new strategy of reinvesting maturing or refinanced mortgage-related securities was necessary to avoid an unwanted tightening given the weakening economic recovery, minutes of the Aug. 10 policy-setting meeting showed Tuesday.
"Most members judged, in light of current conditions in the MBS market and the committee's desire to normalize the composition of the Federal Reserve's portfolio, that it would be better to reinvest in longer-term Treasury securities than in MBS," according to the minutes.
Although renewing the asset purchase program completed in March wasn't discussed, Fed officials left open the option of putting proceeds back into the mortgage market.
"While reinvesting in Treasury securities was seen as preferable given current market conditions, reinvesting in MBS might become desirable if conditions were to change," the minutes said.
