The Federal Reserve maintains a $100 billion bond purchase program to guard against the risk of declining reserves in the future.

The Federal Reserve announced on Monday that it will continue to purchase approximately $10 billion in U.S. Treasury securities in the current round of operations ending on August 13, maintaining the same scale as the previous two periods. This is to ensure that the banking system maintains adequate levels of reserve balances and prepares in advance for any liquidity tightening that may result from an increase in the Treasury Department's cash balance in the coming months. According to the arrangement published by the New York Fed's Open Market Trading Desk, the Federal Reserve will also conduct approximately $17.6 billion in the reinvestment of maturing securities during the same period. Although the Federal Reserve believes that overall operations in the money markets are stable at the moment, the decision-makers are still cautious about the future liquidity situation. It is widely expected that the U.S. Treasury Department will increase the issuance of short-term Treasury securities in the future and raise the cash balance to over $1 trillion. As the Treasury Department absorbs market funds, this process may lead to a decrease in reserve balances in the banking system and an increase in short-term financing costs. To address this risk, the Federal Open Market Committee (FOMC) modified its policy implementation statement during its June meeting, explicitly stating that reserve management purchases can be temporarily suspended or adjusted as needed if there is a change in market conditions to enhance policy operational flexibility. The Federal Reserve ended its balance sheet reduction at the end of 2025 and then turned to replenishing reserves to the financial system by purchasing short-term U.S. Treasury securities maturing within a year. In December 2025, the Federal Reserve increased monthly Treasury purchases to approximately $40 billion to relieve pressure on the short-term financing market. At the time, then-Federal Reserve Chairman Powell stated that this was done to replenish liquidity in advance and ensure that the banking system had sufficient reserves during the tax season in April. However, as market liquidity improved, the Federal Reserve has gradually reduced its purchase scale this year. In April, the monthly purchase scale was reduced to $25 billion; in May, it was further reduced to $10 billion, both decreases exceeding market expectations. Roberto Perli, manager of the New York Fed's open market account, emphasized again last week that reserve management purchases do not follow a preset path, and the Fed will flexibly adjust the monthly purchase scale based on market conditions to ensure that bank reserves remain at an "ample" level. Currently, overall liquidity in the U.S. money market remains adequate. A large amount of funds continue to flow into money market funds, while there has been an increase in funding in the repo market ahead of the Fed's July meeting, leading to an oversupply of funds exceeding the demand for collateral. Data shows that the secured overnight financing rate, which measures the cost of financing with U.S. Treasury securities as collateral, has mostly been lower than the bank reserve rate over the past month and dropped to its lowest level in about six weeks last week, reflecting relatively loose funding conditions in the short-term financing market. As of July 8, the size of reserve balances in the U.S. banking system was approximately $3.14 trillion, higher than $2.85 trillion at the end of 2025.