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Fed Bill Buying Set for Major Cut Post-April
27 Mar
Summary
- Federal Reserve's Treasury bill purchases to decrease significantly after April 15.
- Purchases were initiated to rebuild liquidity after quantitative tightening.
- The Fed aims to ensure market liquidity around upcoming tax payment dates.
The Federal Reserve's substantial purchases of Treasury bills are anticipated to diminish significantly in the coming month. Roberto Perli, manager of the System Open Market Account at the Federal Reserve Bank of New York, indicated that the current pace, around $40 billion monthly, is likely to be considerably reduced after April 15.
These large-scale purchases began at the end of last year to rebuild liquidity following the conclusion of quantitative tightening, a process that had reduced the Fed's balance sheet from approximately $9 trillion to under $7 trillion. The Fed aims to ensure orderly market conditions and manage liquidity around the approaching tax payment dates.
Perli explained that buying in advance of the tax date was operationally more practical than a large, concentrated purchase later. The Fed anticipates that any excess liquidity may temporarily lower money-market rates and flow into the central bank's reverse-repo facility.
