Money Markets Are Giving Fed Room to Keep Shedding Treasuries
- Bigger bill auctions have yet to impact bank reserves
- Money-fund appetite for Treasury bills may reach a limit
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Money markets are giving the Federal Reserve a green light to continue shedding Treasury securities from the massive pile accumulated as part of its pandemic response.
By not rolling over all of its maturing holdings of US government debt, the Fed is forcing the Treasury to borrow more from the investing public. The risk is that the increased borrowing will drain reserves from the banking system to low levels that have caused problems in the past.