- Many interpret this as a form of stealth QE
- In April, it was reported that the Fed’s Reverse Repo Facility (RRP) balance had plummeted from over $2.5 trillion in 2022 to $148 billion
- Also today, the US Treasury auctioned $150 billion in 3-year Treasury notes, but only sold $78 billion
Today, the Federal Reserve (Fed) executed a big financial maneuver by purchasing $20 billion in 3-year Treasury bonds. This transaction marks the largest single-day bond purchase since the quantitative easing (QE) programs back in 2021.
The move has sparked discussions among analysts and investors, with many interpreting it as a form of “stealth QE,” which could mean that the Fed is injecting liquidity into the financial system without formally announcing a new QE program.
Fed Bond Buy & Low RRP Signal Liquidity Shift
This rather large bond purchase may be seen as the Fed’s attempt to stabilize the current financial markets. Last month, it was reported that its Reverse Repo Facility (RRP) balance had plummeted from over $2.5 trillion in 2022 to just $148 billion, which again indicates a major release of liquidity into the market.
Some community members are skeptical about the implications of stealth QE, as they argue it’s a pre-scheduled action and that the Fed’s balance sheet hasn’t expanded yet.
That said, the bond purchase isn’t the only notable thing that took place today. Namely, the US Treasury auctioned $150 billion in 3-year Treasury notes but only sold $78 billion. This could be a cause for concern for investors about future inflation or economic stability, as it points to a weak demand.
What ‘Stealth QE’ Could Mean for Crypto Markets
What the Fed did can have quite a bit of an impact on the cryptocurrency market, both in the short and long term. When the Fed injects liquidity, even if it’s quietly, it often leads to more capital flowing into risk assets, and that includes Bitcoin and other cryptocurrencies. Then, if the Fed is truly avoiding rate cuts but still easing via stealth QE, bond yields may remain stable or fall, making yield-less assets like crypto more attractive.
Historically speaking, QE has coincided with crypto bull runs such as the one in 2020 to 2021.
Still, there is always an air of uncertainty in situations like these. For instance, if it turns out that the stealth QE is a temporary band-aid and the Fed later tightens policy or raises rates unexpectedly, crypto markets could face sudden corrections. As always, caution is advised.
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