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Strategists: U.S. Treasury's increased supply of Treasury bonds could put pressure on the Fed to increase purchases
a day ago

According to Odaily Planet Daily, Shan Ahmed, a strategist at Metlife Investment Management, stated in a report that the US Treasury's plan to issue more Treasury bills to finance its deficit could put pressure on the Federal Reserve to purchase more short-term government bonds. Fed officials have stated that one of the central bank's goals is to align its portfolio structure with the composition of US Treasury bonds in circulation. Currently, the Fed's $4.2 trillion Treasury bond portfolio consists of only $195 billion in Treasury bills, or about 5%. Ahmed wrote, "An increased Treasury use of Treasury bills would push the Fed's portfolio structure further away from this goal." Based on previous assumptions about the ideal portfolio size, Metlife strategists suggest that the Fed would need to purchase nearly $900 billion in Treasury bills to bring its holdings back to the current 20.2%. If the Treasury increased its Treasury bill issuance to 25%, the Fed would need to purchase over $1.3 trillion in Treasury bills.