BofA Says the Fed’s T-Bill Buying Can Help Lower 10-Year Yields

Federal Reserve purchases of Treasury bills to maintain adequate levels of cash in the banking system has the potential to restrain long-term yields, interest-rate strategists at Bank of America Corp. say.

The Fed’s reserve management purchases — combined with its decision in October to buy Treasury bills with the proceeds of mortgage-backed securities on its balance sheet — will absorb much of the net supply of bills over the coming year, Wall Street strategists broadly expect.

That puts the US Treasury Department in the position of having to decide whether to meet its increasing borrowing need by selling more bills ...