JPMorgan’s $350B Fed Exit: Rate Cuts Spark Massive Treasury Pivot
Wall Street's biggest player just made a $350 billion statement. JPMorgan Chase is pulling its cash from the Federal Reserve, redirecting the mountain of capital toward U.S. Treasuries. The trigger? Anticipated interest rate cuts. This isn't a minor portfolio tweak—it's a strategic cannonball into the bond market.
The Great Liquidity Shift
Forget subtle moves. The bank is executing a full-scale pivot, bypassing the Fed's overnight facility in favor of government debt. The sheer scale of the withdrawal signals a fundamental reassessment of risk and return. It's a classic case of capital chasing yield the moment the central bank hints at loosening its grip.
Reading the Fed's Tea Leaves
The strategy hinges on one bet: that lower rates are coming. By front-running the policy shift, JPMorgan aims to lock in higher yields before they disappear. It's a high-stakes game of monetary policy anticipation, where being early is everything. The move pressures other major institutions to follow suit or risk being left behind in a lower-for-longer yield environment.
A Cynical Take on Wall Street's 'Genius'
Let's be real—this 'bold pivot' is just bankers doing what they always do: following the money. It's less a stroke of genius and more a herd instinct dressed up in a bespoke suit. The real story isn't their foresight; it's what this $350 billion flight says about confidence in the Fed's next act. When the music stops, someone's always left without a chair, but for now, the dance is all toward Treasury.
Tracking how the bank redirects cash as rate cuts continue
Bill Moreland, the founder of BankRegData, said, “It’s clear JPMorgan is migrating money at the Fed to Treasuries. Rates are going down, and they’re front-running.”
Generally, JPMorgan does not give details about the maturities of the Treasuries it holds or any interest rate swap contracts it may use for risk control.
The bank had avoided large long-term bond positions in 2020 and 2021 when rates were low. That avoided the large paper losses that hit rivals such as Bank of America when the Fed raised rates fast in 2022.
JPMorgan then earned more on cash kept at the Fed than it paid out to customers because of stable deposits that did not move even during the tightening cycle. Its move into Treasuries before rate cuts helped it lock in higher yields and avoid lower earnings as rates kept falling.
The wider impact of JPMorgan’s decision across the banking system as the Fed lowers rates
The size of JPMorgan’s withdrawals was so large that it offset changes in Fed balances from more than 4,000 other U.S. banks. Total balances held by all banks fell from $1.9 trillion to $1.6 trillion since the start of 2024.
Banks have earned interest on cash at the Fed since 2008, which allowed the central bank to manage short-term rates. Those payments reached $186.5 billion in 2024 as high rates stayed in place before the cuts.
Political pressure also built around these payments.
The Senate rejected a bill in October that aimed to stop the Fed from paying interest on reserve balances. Senator Rand Paul, who led the push, said the Fed was paying “hundreds of billions of dollars to banks to keep money idle.”
Rand’s argument was backed by Republican senators Ted Cruz and Rick Scott, who also opposed the payments.
Rand released a report earlier this month saying the top 20 banks earned $305 billion in interest on reserves since 2013. JPMorgan received $15 billion of that in 2024 while reporting $58.5 billion in full-year profit.
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