The Federal Reserve’s balance sheet has stopped shrinking — but it hasn’t stopped changing shape. Six months into the post-QT era, the latest weekly H.4.1 release shows what the Fed’s reinvestment policy actually looks like in practice: $275 billion more Treasury securities and $191 billion fewer agency mortgage-backed securities than a year ago.
It’s the cleanest snapshot yet of the portfolio pivot the Federal Open Market Committee set in motion last October, when it voted to conclude the reduction of its aggregate securities holdings on December 1, 2025. And it’s quietly making the Fed a steady marginal buyer at the front end of the Treasury curve.
The H.4.1 snapshot
For the week ended June 17, 2026, the Fed’s balance sheet stood at $6,736.4 billion, up just $11.0 billion from the prior week. Under the hood, three numbers tell the story.
| Item | Level ($B) | WoW Change ($B) | YoY Change ($B) |
|---|---|---|---|
| Total assets | 6,736.4 | +11.0 | +55.4 |
| U.S. Treasury securities | 4,487.3 | +7.4 | +275.0 |
| Agency MBS | 1,964.8 | +0.0 | −191.4 |
| Reverse repo (RRP) | 335.6 | +18.3 | −241.6 |
| Reserve balances | 3,033.4 | −47.3 | −372.9 |
| Treasury General Account (TGA) | 880.7 | +52.6 | +543.0 |
The Treasury portfolio is now $275 billion larger than it was twelve months ago. The MBS portfolio is $191 billion smaller. Total assets are up only about $55 billion in the same window. The picture is composition, not expansion.
How the pivot actually works
The mechanics trace back to the October 28–29, 2025 FOMC meeting. The Committee cut the federal funds target range by a quarter point — to 3.75% to 4.00% — but the bigger structural decision was buried in the implementation note: starting December 1, 2025, the Fed would stop letting Treasuries roll off and would “reinvest all principal payments from the Federal Reserve’s holdings of agency securities into Treasury bills.”
Two things changed at once. Treasury runoff — capped at $5 billion a month at the time — ended. And agency MBS principal, which had been allowed to run off uncapped earlier in 2025, now gets recycled into bills rather than retired. The balance sheet’s overall size stops contracting, but its composition tilts steadily toward shorter-dated Treasuries every month.
That mechanism is what’s driving the YoY numbers. Implied by the $191 billion MBS YoY decline, agency MBS principal is running off at roughly $40–50 billion a quarter — and since December that flow has been recycled into the System Open Market Account as Treasury bills. Treasuries that mature inside the portfolio get rolled into newly auctioned issues rather than redeemed. The Fed is, in effect, a passive but steady bid in the bill auction stack.
What it means for fixed-income markets
The most direct impact is at the front end. Three-month Treasury bills printed 3.70% as of June 23, while the effective federal funds rate sat at 3.63%. That 7-basis-point bill-over-funds spread is unusual — bills normally trade through funds when supply is balanced — and it reflects heavy Treasury bill issuance to refill the cash account. The Fed’s reinvestment program absorbs some of that supply at the margin, but not enough to fully offset the issuance.
For agency MBS, the implications cut the other way. The Fed is no longer a price-supportive holder in MBS; the portfolio is shrinking by design. Spread to Treasuries — the additional yield MBS investors demand over comparable-duration Treasuries — has stayed wide of pre-2022 norms throughout the runoff period, and the post-QT regime does nothing to change that arithmetic. Mortgage originators still have to compete with elevated spreads for capital.
The reserve balance picture looks more alarming on the surface than it is. Reserves at $3.03 trillion are down $373 billion year over year — but the Treasury General Account is up $543 billion in the same window. When the Treasury raises cash through bill issuance and parks it at the Fed rather than spending it, reserves drain into the TGA rather than into the banking system. The Fed’s stated goal all along has been to hold reserves at an “ample” level — generally pegged in the high-$2 trillion to $3 trillion range — and the current $3 trillion print is at the comfortable end of that band, not below it.
The overnight reverse repo facility, the other liquidity buffer, sits at $336 billion. That is dramatically off the $2.5 trillion peak from 2022–2023, but a $336 billion cushion still gives money market funds a placeholder when bill yields slip below the RRP rate.
What to watch next
The next FOMC meeting is scheduled for July 28–29, 2026. Any change to the reinvestment policy — for example, broadening MBS reinvestment beyond bills into the Treasury coupon curve — would alter the duration profile the Fed is buying and ripple through the yield curve. Markets aren’t pricing in such a shift, but a hint in the meeting minutes or post-meeting press conference would matter.
The TGA balance is the other thing worth tracking. Treasury cash holdings have ballooned to $880.7 billion, more than double the level a year ago. A meaningful drawdown — for instance, around debt-ceiling negotiations or a one-off spending surge — would push reserves back up and ease front-end funding pressure. The opposite path, where Treasury keeps building cash, would continue to drain reserves and tighten money-market conditions.
Underneath the calm headline of a stable $6.74 trillion balance sheet, the Fed has executed a roughly $466 billion gross reshuffle between Treasuries and MBS in twelve months — even as total assets have grown only $55 billion. The mechanics are technical; the consequences are not. Whoever holds duration, originates mortgages, or trades the bill curve is already living inside the new regime.
Sources
- Federal Reserve H.4.1, June 18, 2026 release (week ended June 17, 2026)
- Federal Reserve H.4.1 current release
- FOMC statement, October 29, 2025
- FOMC implementation note, October 29, 2025
- Federal Reserve policy normalization principles and plans
- Federal Reserve H.15 selected interest rates, as of June 23, 2026
- FOMC meeting calendar
Disclosure: This article was produced with AI assistance and reviewed before publication. It is for informational purposes only and is not investment advice.