Strategist: US Treasury increases treasury securities supply may pressure Fed to increase purchases
2025-07-31 18:41:55
Shan Ahmed, strategist at Metlife Investment Management, said in a report that the US Treasury's plan to issue more treasury securities to cover the deficit could put pressure on the Fed to buy more short-term government bonds. Fed officials said one of the central bank's goals was to match its portfolio structure with the US Treasury bonds in circulation in the market. Currently, the Fed's $4.20 trillion Treasury portfolio contains only $195 billion of treasury securities, or about 5%. "The increased use of treasury securities by the Treasury would further deviate the Fed's position structure from this goal," Ahmed wrote. Based on previous assumptions about the ideal portfolio size, Metlife strategists said the Fed would need to buy nearly $900 billion of treasury securities to lift its holdings to match its current ratio of 20.2 per cent. If the Treasury increases the share of treasury securities issued to 25%, the Fed would need to buy more than $1.30 trillion of treasury securities.
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