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2025-12-17 20:27:42
[The Fed's New Tools Effectively Alleviate Year-End Funding Anxiety in the Bond Market] Analysts point out that with the Federal Reserve's announcement of new financing plans, anxiety about year-end funding pressures in the US bond market has significantly eased. Typically, banks reduce lending and hoard cash at the end of quarters and years to adjust their balance sheets, leading to higher short-term interest rates at the end of the year. This was the case in September 2019, when repurchase rates surged. However, after the Fed announced last week that it would purchase short-term Treasury bills to actively manage cash levels and ensure interest rates remain under control, market pricing for repurchase rates during this year's year-end period (December 31 to January 2) has fallen sharply. Bob Savage, a strategist at BNY Mellon, stated that the Fed now possesses the appropriate tools to avoid similar sharp fluctuations as in 2019. Furthermore, the Fed's bond-buying measures not only alleviate seasonal funding pressures but may also support bond prices and lower yields by reducing future private demand for Treasury bills, thus easing the debt supply pressure that previously pushed up repurchase rates.
