On October 29, during its latest meeting, the Fed announced a 25 bps cut to its key interest rate, as well as the end of its quantitative tightening (QT) program on December 1, 2025.
Since mid-2022, the Fed's QT has involved gradually reducing the balance sheet of the central bank by allowing the bonds it holds to mature without replacement. These bonds were purchased during periods of quantitative easing (QE), the most recent of which was in response to the Covid-19 pandemic. In 2022, the Fed’s balance sheet had grown to $9 trillion. With the end of QT, the Fed will now reinvest the proceeds from maturing bonds, keeping its balance sheet stable at current levels.
Our analysis
Starting December 1, the Fed will once again provide structural support to the US bond market, with the capacity to purchase more than $200 billion in Treasury securities annually, focusing particularly in the short-term segment. This creates the conditions for the US Treasury to shift more of its new issuance toward shorter maturities, indirectly easing pressure on longer-term yields.
The decision is likely driven by recent signs of tension in US money markets. The Fed aims to prevent a scenario in which ongoing liquidity withdrawal could threaten financial stability—similar to what occurred during its previous round of quantitative tightening in 2019, when short-term rates spiked.
Written on November 7, 2025. Opinions subject to change. This document has no pre-contractual or contractual value. It is provided for information purposes. The analyses and/or descriptions contained in this document should not be considered as advice or recommendations from Lazard Frères Gestion SAS. This document does not constitute a recommendation to buy or sell securities, nor does it encourage investment. This document is the intellectual property of Lazard Frères Gestion SAS - 352 213 599 RCS Paris 25, RUE DE COURCELLES - 75008 PARIS
