Fed signals end to Treasury bill purchases after mid-April
Reduction in balance sheet rebuilding program removes key source of market liquidity support
The Federal Reserve plans to significantly scale back its Treasury bill purchases after mid-April, removing a key source of liquidity from financial markets just weeks after stocks entered correction territory.
New York Fed official Christopher Perli signaled that the central bank's monthly pace of Treasury acquisitions would be 'significantly reduced' after April 15, according to remarks reported by Dow Jones Newswires. The announcement comes as the Fed moves beyond a $124 billion balance sheet expansion program launched late last year to rebuild depleted bank reserves.
The central bank formally concluded its quantitative tightening program in December 2025, earlier than many market participants had anticipated, and began purchasing Treasury bills to ensure adequate liquidity in the financial system. The purchases were designed to maintain smooth market functioning rather than stimulate economic growth, according to Federal Reserve research.
Treasury yields have remained elevated despite the Fed's liquidity injections. The U.S. 10-year Treasury note, a benchmark for long-term borrowing costs, stood at 4.26% as of March 25, 2026, and surged toward 4.37% earlier in the week. The stubbornly high yields reflect persistent inflation concerns, significant geopolitical risks, and large fiscal deficits that have outweighed the Fed's balance sheet support.
The reduction in Treasury purchases represents another step toward normalization of monetary policy following years of extraordinary intervention. While the direct impact of quantitative tightening on financial conditions since 2022 has been considered modest compared to policy rate changes, the removal of the Fed as a buyer could increase upward pressure on yields at a time when investors are already demanding higher returns to hold government debt.
Market participants are now assessing whether the Fed's liquidity withdrawal will exacerbate recent volatility. The Nasdaq Composite closed in correction territory on Thursday, while the Dow Industrials dropped nearly 470 points, as investors grappled with higher borrowing costs and geopolitical tensions in the Middle East.
The Fed's balance sheet strategy remains in focus as officials attempt to navigate between maintaining adequate bank reserves and reducing central bank footprint in financial markets. The upcoming moderation in Treasury purchases will test whether markets can function smoothly without the liquidity support that has been in place since late 2025.