The Fed Is Quietly Re-Inflating Markets

What the Fed’s T bill buying in 2026 really means

Most people watch rates, CPI, and FOMC headlines. The real moves rarely show up there. Liquidity often shifts in silence, long before anyone screams "pivot".

The Fed ending QT was the loud part.
The bill buying in 2026 is the part the market is sleeping on.

Here is the real picture.

QT is done. Balance sheet is no longer shrinking.
QT officially ended on December 1, 2025.
No more runoff eating liquidity. No more passive tightening.

What this means in practice:
- Treasuries that mature are rolled over instead of disappearing.
- MBS runoff is reinvested into T bills, not allowed to drain reserves.
- The balance sheet is effectively frozen in size.
- Liquidity stops leaking out of the system.

This sets the stage for what comes next.

So why does the Fed start buying a lot of bills in 2026?
The chart shows monthly T bill purchases rising from roughly 20B early 2026 to more than 50B at the end of the year.
This is not QE. It is the Fed managing reserves and avoiding another funding accident.

Think of it as the Fed quietly refilling the plumbing.

Reasons behind the move:
- MBS runoff still generates cash. Instead of letting that cash vanish, the Fed redirects it into bills.
- Bills provide maximum flexibility. They mature fast and do not distort the long end of the curve.
- The Fed wants reserves to stay in the "ample" zone after QT ended.
- Buying bills gives them a clean way to support liquidity without political noise.

This is not stimulus, but it is not neutral either.

What this means for markets
This part is what traders should actually care about.

Effects of bill buying:
- It injects reserves into the banking system.
- It keeps funding markets smooth and avoids collateral shortages.
- It pressures short term yields by removing supply.
- It improves liquidity conditions without touching the policy rate.
- It creates a slow positive drift for risk assets.

Crypto usually reacts first to liquidity changes, even if macro commentary takes months to catch up.

The trap everyone will fall into
Most people will look at all this and say:
"QT ended so policy is neutral. Nothing changes until Powell talks about cuts."

They will miss the entire setup.

Reality:
- QT ending stops the drain.
- Bill buying quietly adds liquidity back.
- And on top of that, we are likely getting a more dovish Fed chair.
- Polymarket already prices Kevin Hassett as the next one, and his profile supports 2 to 4 cuts in the first year.

So while everyone argues about recession odds on CT, the actual structure is shifting toward easier conditions from two sides:
silent liquidity support now, and probable rate cuts later.

That is the trap.
People keep waiting for the "official pivot", while the real pivot has already started.