A related concern of some was that the purchase of MBS was a form of credit allocation, rather than simply monetary policy that lowered long-term rates for all borrowers. For similar reasons, the proceeds of agency securities accumulated pursuant to the first large-scale asset purchase program were reinvested in Treasury securities rather than in other agency securities.
At the September FOMC meeting, we changed our reinvestment policy so that the proceeds of maturing agency securities will now be reinvested in new MBS. Yields on longer-duration Treasury securities had trended down appreciably in the late summer in response to market demand, safe-haven flows, and diminishing expectations for growth.