Strategist: The US Treasury Department's increase in Treasury supply may pressure the Federal Reserve to increase purchases

According to a report by Golden Finance, Metlife Investment Management strategist Shan Ahmed stated that the US Treasury's plan to issue more Treasury bonds to fill the deficit may pressure the Federal Reserve to purchase more short-term government bonds. Federal Reserve officials said that one of the central bank's goals was to match its portfolio structure with the structure of US treasury bond bonds circulating in the market. At present, the US $4.2 trillion treasury bond portfolio of the Federal Reserve only contains US $195 billion of treasury bonds, accounting for about 5%. Ahmed wrote, "Increasing the use of Treasury bonds by the Treasury Department will further deviate the Federal Reserve's portfolio structure from this goal." Based on previous assumptions about the ideal investment portfolio size, Metlife strategists stated that the Federal Reserve will need to purchase nearly $900 billion in Treasury bonds to increase its holdings to match the current ratio of 20.2%. If the Ministry of Finance increases the proportion of Treasury bond issuance to 25%, the Federal Reserve will need to purchase over $1.3 trillion worth of Treasury bonds.