On 12/12/12, the Federal Open Market Committee (FOMC) announced open-ended purchases of Treasury and Mortgage-backed Securities up to $85 billion per month. This is the Quantitative Easing round 3 (QE3) that media has been talking about for several months.
Out of $85 billion, Federal Reserve is spending approximately $45 billion per month in buying Treasury securities, and the remaining $40 billion on mortgage-backed securities.
At the beginning of the month, Fed usually publishes the schedule for their planned Treasury operations for the entire month. The schedule includes the plan for the purchase of $45 billion Treasury securities, which is part of QE3. Check the month long schedule at:
The days when Fed is buying Treasury securities are often referred as “POMO days”. The general impression is that when Fed spends large amounts of dollars purchasing Treasury securities on any scheduled POMO day, that money usually ends up in equity markets pushing the stock market indices upwards. One such example is the May 17, 2013 POMO day when Fed spent approximately $5.5 billion on Treasury securities and all three major indices (DOW, S&P 500 and NASDAQ) ended up more than 0.75% for the day with no market moving news of any sort. Of course, Fed’s $5.5 billion is not alone for the rally in stock market. It is a general belief that the strengthening US dollar and currency devaluation across the globe is making traders/investors across the world to invest in US stock market causing the demand/supply to play.