The Fed's bond-buying program is showing results: year-end repurchase rate expectations are declining.

Analysts point out that year-end anxiety in the US bond market has eased, with the market anticipating that the Federal Reserve's new financing plan will alleviate seasonal funding pressures. Banks typically reduce lending and hoard cash at the end of quarters and years to adjust their balance sheets, which leads to higher short-term money market rates at the end of the year. For example, in September 2019, repurchase rates surged due to a sharp drop in bank reserves caused by concentrated corporate tax payments and debt repayments. However, after the Federal Reserve announced last week that it would purchase short-term Treasury bills to manage cash levels and ensure control over the target interest rate range, repurchase market pricing for the year-end period (December 31 to January 2) has fallen sharply. Bob Savage, head of macro market strategy at BNY Mellon, said, "The Fed aims to avoid sharp interest rate fluctuations on tax days or at the end of the year, and now has the appropriate tools. We do not expect a repeat of the market volatility of 2019." Analysts point out that the Fed's measures will alleviate year-end funding pressures. Meanwhile, the Federal Reserve's bond purchases may reduce private investor demand for Treasury bills in 2026, thereby supporting bond prices, lowering yields, and easing the debt supply pressure that previously pushed up repurchase rates. (Jinshi)