Federal Reserve suddenly increases purchases: $40 billion monthly short-term debt buy-in, Wall Street is all revising forecasts

【Blockchain Rhythm】On December 12th, a major move—The Federal Reserve announced directly that it would buy $40 billion worth of short-term government bonds each month. As soon as this figure was released, Wall Street folks panicked because it was far more than previously expected.

Barclays has now calculated that the Federal Reserve may buy up to $525 billion in short-term debt next year, whereas they originally thought it would be only $345 billion. Essentially, this move signals that the Federal Reserve has “zero tolerance” for market liquidity tightness, and will inject funds at the slightest sign of turbulence.

JPMorgan Chase and TD Securities are now also revising their forecasts, believing that the Federal Reserve will absorb even more debt. BofA is taking a harder stance, directly saying that in order to stabilize monetary market rates and ensure sufficient reserves, this buy-and-hold pace might need to continue even longer.

Meanwhile, strategists are breathing a sigh of relief—the Federal Reserve has been shrinking its balance sheet for months, accumulating enough market pressure. Now, with this bond-buying plan in place, short-term interest rates immediately react: trading volume surged on Wednesday, and the two-year swap spread shot up to its highest point since April. Those involved in SOFR and federal funds rate spreads are likely to be waking up laughing recently.

Ultimately, this is a signal: liquidity is returning, and borrowing costs should start to decline. For the crypto market, when traditional finance opens the tap, the pressure on funding naturally eases significantly.