Open Market Operations (OMO)

The Federal Reserve’s buying and selling of government securities in the open market to adjust the supply of reserves and influence interest rates.

What is Open Market Operations (OMO)?

Conducted by the New York Fed’s Trading Desk, OMOs include permanent operations like outright purchases of Treasuries (e.g., $600 billion monthly during QE in 2020) and temporary ones like repos to manage daily liquidity. In 2024, the Fed executed over $1 trillion in repo operations to stabilize funding markets during volatility. Purchases increase reserves, lowering rates, while sales drain them, raising rates.

The FOMC directs OMOs, with the System Open Market Account (SOMA) holding $7.2 trillion in securities as of September 2025. During the 2008 crisis, OMOs expanded to include agency MBS, totaling $1.25 trillion in purchases under QE1. In quantitative tightening since 2022, the Fed has allowed up to $95 billion in securities to mature monthly without reinvestment.

OMOs affect broader markets; a $100 billion Treasury purchase can lower 10-year yields by 10-20 basis points, stimulating borrowing.