What the Fed announced
The Fed said Monday it will skip reserve-management Treasury bill purchases again for the monthly window that runs through Oct. 14. The New York Fed's markets desk posted that plan on its website. At the same time, it expects to carry out roughly $15.6 billion of reinvestment purchases during the period. The decision should not be interpreted as a change in monetary policy or the balance-sheet strategy.
Why conditions look calm right now
The ongoing pause points to confidence that reserves held by banks are ample and that funding markets are behaving. One signal: the Secured Overnight Financing Rate, the benchmark tied to borrowing against Treasuries, has been trading at or under the interest on reserve balances rate for much of the past month. Another tailwind has been the Treasury's recent paydown that reduced bill supply before the quarterly tax deadline.
In a broader sense, cash exceeds the supply of collateral; banks are placing greater amounts in short-term markets, and assets in money-market funds have reached record levels. Those forces have kept money-market rates steady even as Treasury has been issuing a large volume of bills.
How we got here and recent steps
The Fed abruptly ended the shrinking of its balance sheet at the end of 2025 and switched to adding reserves by purchasing short-dated Treasuries that mature in under a year. In December, it began buying about $40 billion in bills per month to relieve pressure building in very short-term rates. Then-Chair Jerome Powell said the Fed was "front-loading" those purchases to ensure sufficient reserves through April tax season.
Officials then cut reserve-management purchases to $25 billion in April, a bigger pullback than many anticipated after earlier guidance that the reduction could be "somewhat gradual." They trimmed again to $10 billion in May and fully halted them in August.
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In June, the Federal Open Market Committee updated its policy implementation note to explicitly allow temporary pauses in reserve-management purchases if money-market conditions warrant. In July, New York Fed official Roberto Perli reiterated that these purchases are not on a preset path; the Desk can scale amounts up or down month to month based on conditions, and will continue to set purchase sizes to keep reserves within the ample range.
Market views and what it means for your wallet
Strategy teams at Wells Fargo and Bank of America anticipated a pause this month, with purchases resuming in mid-October as funding markets could see pockets of strain when Treasury increases bill issuance starting next month. Samuel Earl of Barclays Plc expects purchases to bounce back to $10 billion in October and reach $20 billion in November. Strategists at Citigroup Inc. disagree, predicting the Fed will remain on pause through year end because, in their view, bank reserves have already moved into a "lightly abundant regime."
As of Sept. 9, bank reserves were $3.04 trillion, higher than the year to date average of $3.01 trillion and up from $2.85 trillion recorded at the end of last year. That backdrop of higher reserves, ongoing reinvestments, and a pause in fresh RMPs helps explain why short-term rates have stayed contained while money-market assets keep climbing. For your cash and short-term holdings, the path of bill issuance and these monthly purchase decisions are what drive the little moves you feel in yields.
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