Kicking the can down the road: United States: Money Markets

Research evidence excerpt

Kicking the can down the road: United States: Money Markets

FICC Research

Interest Rates

18 June 2026

United States: Money Markets

Kicking the can down the road

The FOMC affirmed "ample," but Warsh opened the door to

changes post review. We think ample is here to stay, as the

alternatives are risky with limited benefit. Reducing reserve Samuel Earl + 1 212 526 5426

demand directly would see greater balance sheet reduction. samuel.earl@barclays.com

Reducing the portfolio WAM below outstanding also seems BCI, US

likely. Demi+1 212Hu,526CFA7398

demi.hu@barclays.com

• The FOMC reaffirmed its "ample" implementation framework at the June meeting, but Warsh BCI, US

announced a balance sheet task force that opens the door to changes following the review.

• We think ample is here to stay, as the alternatives are riskier, with limited benefit, and the Fed

in 2019 learned first hand of the dangers for moving into scarcity as SOFR rates jumped nearly

300bp in a single day.

• If the Fed desires a small aggregate level of reserves in the system, it is likely to target reserve

demand directly via liquidity regulations. Reducing the WAM of the UST portfolio to better

match the duration of its liabilities is a likely outcome.

• We still think the Fed can pause RMPs in July, irrespective of the announced task force. That is

because money market rates remain too soft and the buffer of reserves appears unnecessarily

large.

• Adding "when appropriate" to the implementation note's section on conducting RMPs

removes any doubt that the Desk can pause them under the directive.

• The TGA approached $1trn this week, and SOFR remained contained. That points to a wider

SOFR/FF spread and soft funding conditions ahead. We continue to recommend being long

July SOFR/FF.