Fed Quells Market Angst With $40 Billion Monthly Bill Purchases

The Federal Reserve said it will begin buying $40 billion of Treasury bills per month starting Friday, in a move to ease short-term funding costs by rebuilding reserves in the financial system.

The central bank said in a statement that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed on an ongoing basis. Money markets have been flashing signals in recent months that pressures were building up in the $12.6 trillion market while the Fed was shrinking its balance sheet.

Funding strains took on added urgency as short-term rates remained elevated ahead ...