New York Fed says Treasury purchases flexible, can change from $10 bn

The New York Federal Reserve announced that its reserve‑management Treasury bill purchases have been trimmed to $10 billion a month and can be adjusted up or down depending on short‑term funding conditions【1】. The flexibility matters because it lets the Fed fine‑tune liquidity around the tax‑season surge in cash flows and the large net bill issuance expected in the coming weeks.

Reserve‑management purchases become discretionary

Roberto Perli, manager of the System Open Market Account, said the Fed’s Treasury buying program is no longer on a preset trajectory; the Desk can raise or lower the pace as liquidity conditions dictate【1】. The change follows a deliberate scaling back from the $40 billion monthly purchases that began in December to the current $10 billion level, a move intended to rebuild short‑term market liquidity ahead of the mid‑April tax deadline【1】. Perli noted that if net bill issuance tightens reserves in the next two months, the Fed may need to increase purchases again.

Implications for the Fed’s toolkit and balance‑sheet outlook

Perli stressed that the existing “ample reserves implementation framework” remains effective even if future reforms lower the overall reserve demand【2】【3】. He added that the Fed is ready to adjust its balance‑sheet holdings and rate‑control tools, including standing repo operations, should policymakers decide to shift the balance‑sheet strategy under incoming Chair Kevin Warsh【1】. While the Fed’s balance sheet has contracted from a pandemic peak of $9 trillion to about $6.7 trillion, the ability to modulate Treasury purchases provides an additional lever to maintain firm control of the federal‑funds rate【3】.

What to watch

• Upcoming Treasury cash‑management releases and net bill issuance data, which could tighten reserves and prompt a purchase increase.
• The Federal Open Market Committee’s next meeting (mid‑June) for any formal guidance on the reserve‑management schedule.
• Market liquidity indicators, especially repo rates, for signs that the Fed’s standing repo facility is being more heavily used.

The Fed’s statement underscores a shift from a fixed‑schedule approach to a responsive, condition‑driven policy for short‑term Treasury purchases, leaving market participants to watch liquidity flows and upcoming policy meetings for clues on the next adjustment.