The Federal Reserve said Thursday it will buy about $10 billion of Treasury bills this period, unchanged from the previous cycle, as policymakers seek to bolster reserves in anticipation of a liquidity drain in the coming months.
The New York Fed’s open markets desk plans to conduct the reserve management purchases over the monthly period ending July 13, according to its website . It also plans to conduct about $16.5 billion in reinvestment purchases over the same time.
Even though the Fed is confident in the smooth functioning of funding markets, policymakers remain cautious given that the Treasury is expected to increase bill supply and grow its cash balance to more than $1 trillion, which would drain reserves. All that cash must come from somewhere, and the removal of liquidity often drives up funding costs as bank reserves are removed from the financial system.
The Fed abruptly stopped shrinking its balance sheet — a process known as quantitative tightening — at the end of 2025 and pivoted to adding reserves back into the financial system by buying short-term Treasuries due in less than a year.
In December, the central bank began buying about $40 billion of bills each month in a bid to ease the pressures that were building in short-term rates. At that time, then-Chair Jerome Powell said the Fed was “front-loading” its purchases to ensure there were enough reserves through the April tax season.
The central bank sharply reduced RMPs to $25 billion in April, which was greater than anticipated as policymakers had conveyed that the decrease could be “somewhat gradual” to account for uncertainty and other factors. It reduced them to $10 billion last month, another sharp pullback that surprised market participants.
New York Fed’s Roberto Perli said last month the central bank’s T-bill purchases are not on a pre-determined course, and he and his colleagues “stand ready” to adjust the pace of RMPs “up or down as necessary to maintain reserves within the ample range.”
Funding conditions have been soft across the board during the past month as cash has overwhelmed available collateral: banks have been parking more money in short-term markets, and money-market fund assets have reached all-time highs. In addition, the Treasury Department has been slashing its supply of bills despite boosting issuance after seasonal reductions in April.
Bank reserves stood at $3.046 trillion as of June 3. That’s up from $2.85 trillion at the end of last year.
| Firm | Reduction Pace |
|---|---|
| Bank of America | Maintained $10 billion/month forecast for mid-June to mid-July, but acknowledges risk of RMP pause if Treasury General Account (TGA) follows recent historical trend lower and funding softens |
| Barclays | Saw Fed tapering RMPs to zero, with risk to view that they want reserves higher to accommodate Treasury’s cash balance rebuild and increased bill issuance in July |
| BNP Paribas | Expected $10 billion/month pace to be temporary and sees the Fed raising the pace again by the fourth quarter back to steady state estimate of $25 billion/month |
| Citigroup Inc. | Predicted RMPs to remain at $10 billion/month for the rest of the year, especially with upward pressure to persist in August due to increased bill supply, TGA sitting between $900 billion and $950 billion through that month |
| Deutsche Bank | Expected RMPs to remain at $10 billion/month, though wouldn’t be terribly surprised by a change |
| JPMorgan Chase & Co. | Expected RMPs to run at $10 billion monthly pace, largely offsetting growth in currency in circulation and helping stabilize reserves in ample territory |
| TD Securities | Expected Fed to continue at $10 billion/month, with a risk that it reduces the pace to $5 billion/month; don’t expect purchases to stop altogether |
| Wells Fargo | Fed seen continuing at $10 billion/month from May to August, before ramping up to $20 billion from September to December |