What Is Go-Around?

What Is Go-Around?

4 Min.

The Go-Around is the process used by the Federal Reserve to auction Treasury Securities. A small group of qualified buyers, known as primary dealers, take part in these auctions. The aim of the Go-Around is to get the best price possible for all the Treasuries being sold in the auction. These dealers can then sell their holdings on the secondary market for Treasuries (bonds issued by the U.S. federal government and considered one of the safest assets available).


The Federal Reserve employs the go-around method to obtain bids or offer prices from primary dealers for open market operations (OMO). OMO, a central bank activity, entails purchasing or selling Treasury securities in the open market to adjust the money supply. This involves an auction, necessitating the solicitation of bids or offers from eligible dealers.

Exploring Go-Around

In financial markets, the Federal Reserve employs the go-around approach to maximize returns on U.S. government securities in its buying and selling endeavors. An approved roster of banks, broker-dealers, and financial institutions, collectively known as primary dealers, facilitate the Federal Reserve's transactions in the secondary market. Serving as market makers, these primary dealers engage in large-scale auction purchases of federal treasury securities, subsequently redistributing or selling them.

The Federal Reserve's buying and selling activities, encompassing U.S. treasury bills, notes, bonds, and other government securities, align with its monetary policy implementation. Executed by the Federal Reserve Bank of New York's Open Market Desk, these transactions control liquidity in the economy. Purchases inject funds into the banking system and economy, while sales reduce the money supply, curbing lending. This orchestration aims to influence the federal funds rate the interbank lending interest rate. Employing an auction mechanism in its open market operations, the Federal Reserve ensures optimal terms by compelling pre-qualified primary dealers to compete for each opportunity, fostering an environment of competitive bidding.

Treasury Securities Markets: Primary Dealers and Secondary Trading

While primary dealers predominantly acquire treasury securities directly from the government and subsequently engage in secondary market transactions, the U.S. Treasury Department's TreasuryDirect website opens original issuances to public bidding. In contrast, primary dealers competitively bid in the secondary market to buy or sell government securities, acting as counterparties to the Federal Reserve.

Monetary Policy Dynamics: Open Market Operations and Beyond

Within the Federal Reserve's toolkit, open market operations stand as the foremost driver of monetary policy, distinguishing itself among the three primary methods. Alongside this, the discount rate, indicating short-term loan costs for banks from the Federal Reserve Bank, signals potential changes to the federal funds rate target.

In addition, the Federal Reserve mandates capital requirements for banks, specifying the necessary reserves to meet potential withdrawals. These requirements, structured as a percentage of total deposits with tiered thresholds, wield a direct influence. Reductions amplify circulating money while augmenting requirements compel banks to withdraw liquidity, holding it in reserve.

Open Market Operations vs. Quantitative Easing

While open market operations (OMO) and quantitative easing (QE) share similarities, the latter broadens the scope of securities the Fed can acquire for its balance sheet. Unlike OMO, which focuses on short- and mid-term Treasuries, QE encompasses very long-dated Treasuries and non-Treasury securities. The objective is twofold: infusing more money into the economy and maintaining market stability by acting as a consistent buyer in specific bonds or other markets.


The Federal Reserve's Go-Around process serves as a strategic auctioning method for Treasury Securities, involving a select group of primary dealers to ensure optimal pricing. This systematic approach aims to obtain the best value for Treasuries while maintaining market stability. Through the Go-Around, primary dealers play a pivotal role in the secondary market, engaging in large-scale transactions of federal treasury securities. Overall, these practices align with the Federal Reserve's monetary policy implementation, influencing liquidity and contributing to the dynamic interplay of open market operations and quantitative easing within the broader financial landscape.

Open Market Operations (OMO)
Quantitative Easing (QE)
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