Federal Reserve Treasury Bill Purchases Exceed $90 Billion Since December 2025

This analysis examines the Federal Reserve’s substantial Treasury bill acquisition program, wherein over $90 billion in short-dated government securities have been purchased since December 2025. The development represents a notable operational shift that carries significant implications for financial markets, interest rate dynamics, and broader monetary policy trajectory.

The Federal Reserve’s recent Treasury bill purchases through its System Open Market Account (SOMA) represent a meaningful departure from the quantitative tightening framework that had been in place since 2022 [1]. The Treasury Department confirmed on February 4, 2026, that the Fed has been actively accumulating short-dated government securities through what are characterized as Reserve Management Purchases (RMPs) [1]. This activity followed the formal cessation of SOMA runoff operations in November 2025, effectively ending the balance sheet contraction phase that had been ongoing for approximately three years.

The scale of these purchases warrants particular attention. Over $90 billion in Treasury bills acquired within an eight-week window constitutes a substantial liquidity injection into the short-term funding market [1]. This timeframe coincides with elevated government borrowing requirements, as January 2026 Treasury issuance exceeded $200 billion—an 18% acceleration compared to the same period in 2025 [3]. The Fed’s purchasing activity appears designed to support market functioning amid this increased supply, though the policy intent extends beyond simple market stabilization.

The broader context of Fed balance sheet management remains crucial to understanding current developments. The Federal Reserve’s balance sheet expanded dramatically from approximately $800 billion prior to the pandemic to roughly $6.5 trillion over the subsequent decade [2]. The incoming Fed Chair nominee, Kevin Warsh, has publicly expressed interest in reducing the Fed’s holdings, creating apparent tension between stated policy preferences and current market operations [4]. This disconnect between communication and action will require careful monitoring as policy formulation evolves under new leadership.

Market reaction to the Fed’s purchasing activity and broader monetary policy uncertainty has manifested in uneven performance across major indices. On February 4, 2026—the day of the Treasury Department announcement—the NASDAQ declined 1.35%, reflecting heightened sensitivity in technology sector valuations [0]. The Russell 2000 similarly weakened, falling 1.24% and indicating continued small-cap sector concerns about funding conditions and economic outlook [0].

In contrast, the Dow Jones Industrial Average demonstrated relative resilience, advancing 0.36% on the same session [0]. The S&P 500 declined 0.60%, settling at 6,882.71 [0]. This divergence suggests sector-specific concerns are driving market dynamics rather than uniform risk aversion. The technology and small-cap sectors, typically more sensitive to financing conditions and growth expectations, have exhibited pronounced weakness, while large-cap industrials and value-oriented indices have shown greater stability.

The correlation between Treasury bill purchases and equity market behavior merits ongoing observation. The Fed’s liquidity provision has arguably provided a supportive technical backdrop for fixed income markets, contributing to relative stability in short-term rates despite elevated issuance. However, equity markets have exhibited volatility that suggests participants are parsing the implications of potential policy evolution rather than simply responding to current liquidity conditions.

The interaction between Federal Reserve purchasing activity and Treasury market functioning requires detailed examination. The $90+ billion in Treasury bill purchases has provided direct technical support for short-dated securities, helping absorb the increased supply associated with elevated government borrowing [3]. This dynamic has likely contributed to keeping short-term yields lower than might otherwise prevail under pure market supply-demand balancing.

Reserve Management Purchases represent a distinct operational framework from traditional quantitative easing programs. While QE involves large-scale asset purchases intended to lower longer-term rates and stimulate economic activity through portfolio rebalancing channels, RMPs are technically focused on maintaining adequate reserves in the banking system [1]. However, the practical market effects—including price support and yield compression—can overlap significantly, particularly when purchase volumes reach the scale observed over the past eight weeks.

The Treasury Borrowing Advisory Committee (TBAC) documentation for Q1 2026 provides insight into official projections for government financing requirements and market expectations [1]. These projections informed both Treasury auction sizing decisions and Federal Reserve operational planning, suggesting coordination between fiscal and monetary authorities regarding market functioning priorities.

Several risk factors emerge from this analysis that warrant close monitoring by market participants and financial professionals.

: The tension between the Fed’s current purchasing activity and incoming leadership’s expressed preference for a smaller balance sheet creates meaningful policy uncertainty [4]. Should Kevin Warsh’s nomination be confirmed and his policy preferences implemented, the current RMP program could face modification or termination. Market participants should prepare for potential adjustments to the Fed’s operational framework as leadership transition proceeds.

: The $90+ billion in purchases has created artificial demand in the Treasury bill market, potentially masking underlying yield pressures [0]. As these purchases continue or eventually reverse, short-term rate dynamics could experience significant adjustment. Investors with short-term fixed income positioning should remain cognizant of this potential volatility source.

: Any perception that the Fed is re-expanding its balance sheet—even through technically distinct RMP operations—could influence inflation expectations [2]. While the current purchasing activity appears focused on reserve management rather than stimulus, market interpretations may evolve, particularly if purchase volumes accelerate or extend to longer-duration securities.

: The stabilizing influence of Fed purchases provides ongoing support, though the eventual withdrawal of this support could prove disruptive to market functioning [0]. The current environment of elevated issuance means that market participants have become accustomed to Fed purchasing as a backstop, potentially creating vulnerabilities when that support diminishes.

The Federal Reserve’s Treasury bill purchases exceeding $90 billion since December 2025 represent a significant liquidity provision that has supported Treasury market functioning amid elevated government borrowing requirements. The purchases follow the formal end of quantitative tightening in November 2025 and constitute Reserve Management Purchases aimed at maintaining adequate banking system reserves.

Market dynamics have shown sector-specific volatility, with technology and small-cap indices experiencing pronounced weakness while relative stability persists in large-cap value segments [0]. The tension between current operational activity and incoming Fed leadership’s stated preferences regarding balance sheet reduction creates policy uncertainty that market participants must navigate carefully.

Treasury market technical conditions have been supported by Fed purchasing activity, though this support may mask underlying yield pressures that could emerge upon purchase program modification. The trajectory of both purchasing activity and Fed leadership remains fluid, warranting continued monitoring of Treasury auction data, Federal Reserve communications, and broader financial market indicators.