Federal Reserve's Bond-Buying Fades, but Stimulus Doesn't End There

The Fed in recent years has almost completely replaced its inventory of short-term government debt with longer-term securities that do not begin to mature until 2016. It has reinvested just $332 million in Treasuries so far this year, and would need to reinvest just $4 billion in 2015, according to calculations by Lou Crandall, chief economist for Wrightson ICAP, a financial research firm in New Jersey.

Reinvestment of mortgage bonds is also in decline. The Fed received and reinvested about $24 billion a month as borrowers refinanced loans or sold homes in 2013. But as interest rates have ticked upward, prepayments have declined. Reinvestment averaged $16 billion a month during the first six months of 2014, and Mr. Crandall estimates that the volume will stabilize a little below that level next year.

“The numbers are not zero, and it’s still important because they’re very mindful of the signaling effect of their operations,” he said. “But for 2015, it’s largely symbolic.”

That would change, however, in early 2016. Mr. Crandall calculates that $39 billion in Treasuries will mature in February that year, and about $177 billion during the rest of the year. Reinvesting those amounts would have a significant effect, he said.