Federal Reserve Plans $40B Monthly Treasury Purchases

The Federal Reserve will purchase $40 billion of short-term U.S. Treasury bonds monthly, starting December 2025, exceeding market expectations and influencing future debt issuance predictions.

This action aims to stabilize money markets, affecting borrowing costs and potentially providing a favorable environment for risk assets like cryptocurrencies.

Federal Reserve Sets $40B Monthly Treasury Bond Buyback

Increased purchases aim to alleviate pressures in the overnight funding markets. By maintaining ample reserves and stabilizing overnight money-market rates, the Federal Reserve seeks to offset the market stress resulting from earlier balance-sheet reductions. Wall Street strategists expect this buyback plan will support swap spreads and SOFR-fed funds rate basis trading, as evidenced by the rise in short-term interest rate futures and the widening two-year swap spread.

Market responses have been notable. Barclays predicts the total short-term Treasury purchases could reach $525 billion by 2026, exceeding prior estimates. Likewise, JPMorgan and TD Securities suggest the Federal Reserve will need to absorb larger debt volumes. Meanwhile, trading volume surged following the announcement, reflecting an easing of short-term market pressures.

“The FOMC directed the New York Fed’s Open Market Desk to increase SOMA holdings via purchases of Treasury bills and other Treasuries with ≤3 years maturity to maintain ample reserves.” — Jerome Powell, Chair, Federal Reserve

Impact on Markets and Potential Crypto Benefits

Did you know? The Federal Reserve’s balance sheet expansion in 2019 initially helped ease market stress, serving as a precedent for current tactics to stabilize financial conditions.

CoinMarketCap data shows Bitcoin (BTC) trading at $92,302.29 with a market dominance of 58.69%. Despite a 24-hour trading volume of $59.92 billion, reflecting a 13.45% decrease, the price has increased by 2.78% in the last 24 hours. Bitcoin’s substantial 90-day drop of 20.39% contrasts sharply with its recent uptick.

The Coincu research team emphasizes the potential impacts on the financial and crypto markets. The Fed’s liquidity strategy could encourage risk-on behavior, potentially benefiting high-beta assets. Historical trends suggest that Federal interventions often coincide with increased investor activity in both traditional and digital asset markets.