Fed Buys $290 Billion in T-Bills as Reserves Climb Above $3 Trillion
Updated
Updated · ING Think · Jul 6
Fed Buys $290 Billion in T-Bills as Reserves Climb Above $3 Trillion
1 articles · Updated · ING Think · Jul 6
Summary
$290 billion of Fed T-bill purchases since mid-December 2025 has eased repo stress, lifted bank reserves back above $3 trillion and steadied money-market funding conditions.
The program was launched after reserves slipped below $3 trillion and the effective fed funds rate spread widened; that rate has since eased to about 3.63%, just 2 basis points below the 3.65% rate paid on reserves.
SOFR has increasingly traded through the effective fed funds rate, signaling easier repo conditions and reduced month-end volatility as the Fed keeps buying bills to offset mortgage-backed securities runoff while leaving Treasury holdings unchanged.
ING says the calmer funding backdrop supports a view that the Fed will hold rates through the rest of 2026 rather than validate market pricing for hikes, with weaker wage growth and softer demand expected to cool inflation.
Longer term, Chair Kevin Warsh's push to shrink the balance sheet remains speculative: restoring pre-crisis proportions could require unloading roughly $4.5 trillion of bonds and changing bank liquidity rules.