“Not QE”: Why the Federal Reserve Is Buying Treasury Bills?

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15.12.2025

The Federal Reserve is buying Treasury bills again, and markets are paying close attention. Officials call it reserve management, not stimulus, and stress that it is “not QE.” Still, it revives memories of past easing cycles, and yields, liquidity, and investor expectations are already reacting. If the balance sheet is growing, does the label really matter?

Last week, the Federal Reserve announced a new program of Treasury bill purchases - starting around $40 billion per month. The program was described as “reserve management purchases” (RMPs) designed to stabilize liquidity in the banking system and maintain control over the federal-funds rate. Fed Chair Jerome Powell and other officials have been emphatic that this is a technical adjustment, not a shift in monetary policy or a broader stimulus initiative.

Despite this framing, many market commentators and analysts have reacted to the Fed’s move as reminiscent of earlier quantitative easing (QE) programs, prompting debate over whether this truly is “new QE.” Traditional QE involved large-scale purchases of longer-term securities with the explicit aim of lowering long-term yields and stimulating economic activity. In contrast, the current plan focuses on very short-dated bills and is described internally as a technical liquidity measure.

The distinction, or lack thereof, has given rise to the meme “Not QE.” It reflects the Fed’s insistence that the bill-buying program is not a traditional QE program, emphasizing liquidity and rate-control objectives. Critics argue that the label is largely semantic: if the Fed is buying assets and expanding its balance sheet, the effect can resemble QE by increasing system reserves and easing funding conditions.

For Treasury bill yields specifically, the renewed Fed demand is likely to exert downward pressure on short-term rates, all else equal. With 4-week and 3-month T-bill yields recently trading in the rough range of approximately 3.6%-4.3%, sustained purchases should modestly lower yields. This could potentially steepen the yield curve if longer-term yields remain elevated around 4% for 2- to 5-year maturities and above 4% for the 10-year bonds.

For bond investors, it means that the direct impact of “Not QE” on longer maturity yields may be limited compared with classic QE episodes. But, if the program expands to include longer-dated securities or remains in place beyond periods of acute liquidity stress, market participants may increasingly price it as a form of QE, with implications for yield curves and risk assets.

This article does not constitute investment advice or personal recommendation. Past performance is not a reliable indicator of future results. Bondfish does not recommend using the data and information provided as the only basis for making any investment decision. You should not make any investment decisions without first conducting your own research and considering your own financial situation.

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