Will the Fed restart QE? RMP is coming; the market wants to relive the good memories of 2019.

Author: Zhao Ying, Wall Street Insights

Last week, predictions that "RMP" would dominate the market were confirmed, and the Federal Reserve announced this week as expected the launch of its Reserve Management Purchase (RMP) program. Wall Street may be about to witness a liquidity injection feast.

The Federal Reserve announced overnight that it will begin purchasing short-term Treasury bonds as needed to maintain an ample supply of reserves. The New York Fed simultaneously issued a statement announcing plans to purchase $40 billion in short-term Treasury bonds over the next 30 days, the latest move since officially halting balance sheet reduction last week. This move comes against the backdrop of recent unsettling interest rate fluctuations in the $12 trillion US repurchase market, with continued turmoil in the money market forcing the Federal Reserve to accelerate its actions.