Will the Fed Restart Bond Purchases Next Year? Don’t Celebrate Yet—First Understand What They're Actually Doing.

There’s a rumor going around that starting January 2026, the Fed will buy $4.5 billion in short-term Treasuries each month, continuing for half a year. The goal is simple: to prevent bank reserves from running dangerously low at the end of the year and to bring the system back to a “sufficient” safety line.

How credible is this rumor? It’s not official, but the source has weight: Joseph Abate, former head of the New York Fed’s repo desk and now a rates strategist at Bank of America. Wall Street rarely ignores forecasts from someone of his caliber.

Why does he dare to make this claim? The clue is in the overnight repo rates. Recently, indicators like SOFR and TGCR have frequently bumped up against the policy rate ceiling. In plain terms, reserves have shifted from “ample” to “tight.” Even though QT paused on December 1, the underlying pressure hasn’t been resolved—since the 2022 peak, the Fed has reduced its balance sheet by $2.4 trillion, and after the Silicon Valley Bank crisis, banks have become even more conservative, hoarding cash as a lifeline. Year-end liquidity stress is almost inevitable.

So Abate believes the Fed will backstop reserves by buying short-term Treasuries: out of the $4.5 billion per month, $2 billion would offset natural growth in liabilities, and the other $2.5 billion would be real liquidity injection. UBS has a similar forecast—about $4 billion per month over half a year. He even thinks the Fed may include this operation in official guidance after the December FOMC meeting. Bank of America also expects year-end volatility may trigger one to two weeks of term repo operations.

But many people mix up two concepts: reserve management purchases ≠ QE. They are completely different.

Reserve management purchases: Only buy short-term Treasuries, purely to stabilize reserves and prevent repo rates from spiking—a “defensive liquidity injection” with extremely limited impact on long-term rates and risk assets.

QE (Quantitative Easing): Directly buys long-term Treasuries and Mortgage-Backed Securities (MBS), aiming to lower long-term yields and stimulate credit expansion—a more “offensive liquidity injection.” The boost to market sentiment and risk appetite is far greater than short-term Treasury purchases.

So don’t get too excited just because you see “bond buying”—QE is a heavy weapon the Fed won’t deploy lightly.

Will this round of bond purchases help the crypto market?

Yes, but the impact will be mild.

More abundant reserves mean more stable funding rates and reduced fears of cash shortages, so leveraged players can sleep easier. If the macro environment is stable, political risks recede, and global risk appetite recovers, this move could indeed lift risk assets—but the effect is much weaker than QE.

On the other hand, if the economic or political situation is unstable, this kind of “defensive” liquidity injection will be pretty underwhelming for risk markets. Ultimately, the market still looks at fundamentals and sentiment; liquidity is just a catalyst, not a cure-all.