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2025-10-30 21:01:38
[Fed to "Return to Buying"? US Treasury Bulls Rejoice] ⑴ Dario Messi, head of fixed income at Julius Baer, wrote in a report that ending balance sheet reduction on December 1st is only the first step, and the Fed may become a net buyer of Treasury bonds again next year. ⑵ Messi emphasized that this move is not to stimulate the economy, but to maintain an adequate level of reserves consistent with the operational framework. ⑶ Institutional estimates suggest that if reserves as a percentage of bank assets fall below 13%, the Fed may need to purchase approximately $300 billion in Treasury bonds by the second quarter of 2026. ⑷ On Tuesday's close, the 10-year Treasury yield plummeted 7 basis points, marking the largest single-day drop since September, while futures warehouse receipts showed a 18% surge in leveraged funds' net long positions. ⑸ The swap market is betting on a further 50 basis point cut in the federal funds rate before December 2025, fueling expectations of a "Fed returning to bond buying."
