350 billion dollar big move! J.P. Morgan withdraws from the Federal Reserve account and turns to buying U.S. Treasury bonds, betting heavily on interest rate cuts continuing.

According to reports from American media, Wall Street financial giant JPMorgan Chase (JPM.US) has withdrawn nearly $350 billion in cash from its accounts at the Federal Reserve since 2023 and has almost entirely used the same amount of funds to accumulate US government-issued bonds. This move by JPMorgan Chase is seen as preparing for long-term interest rate declines and low interest rates in order to hedge against the future downward pressure on net interest income (NII/NIM). It is seen as marginally beneficial for the yield of the 10-year US Treasury bond, which is known as the "anchor of global asset pricing," as well as for the downward trend in longer-term US Treasury bond yields. Media reports citing data compiled by industry data tracking firm BankRegData have reported that this super commercial bank with assets of over $4 trillion reduced its balance in its Fed account from $409 billion at the end of 2023 to $630 billion in the third quarter of 2025. At the same time, it is reported that JPMorgan Chase significantly increased its holdings in the US Treasury market from $231 billion to $450 billion, meaning that it can ensure higher yields even if the Federal Reserve continues to lower interest rates under a dovish chairman nominated by Trump. These measures show that this largest commercial bank in the United States is adjusting its own allocation to offset the decrease in interest income from the cash parked in the Federal Reserve. According to media reports, the institution can easily profit from interest on deposits in the central bank's account, while JPMorgan Chase pays almost zero interest to many depositors. In response to the highest inflation in 40 years, the Federal Reserve quickly raised interest rates to over 5% in 2022 and early 2023. Starting from the end of 2024, as inflation pressures eased, the FOMC, the Federal Reserve's policy-making body, began a process of rate cuts. Last week, under increasing concerns from more Federal Reserve officials about the weakening domestic labor market in the US, the Federal Reserve lowered its federal funds rate target range to 3.50%-3.75%, the lowest level in three years. Major Wall Street banking giants adjust their reserve balances at the Federal Reserve based on IORB (Interest on Reserve Balances), which is one of the core tools that the Federal Reserve uses to implement monetary policy and influence short-term interest rates. When policy rates are lowered, IORB usually decreases as well, meaning that the interest earned on "cash lying in the accounts at the Fed" will also decrease. The FOMC statement from the Federal Reserve on December 10, 2025, indicated that the federal funds rate target range had significantly dropped to 3.50%-3.75%. Therefore, JPMorgan Chase's shift from assets held in reserves during the "high-interest-rate period" to government bond assets that can lock in higher yields for a longer period of time is a standard "asset reallocation in a rate cut environment." Therefore, JPMorgan Chase is betting on the probability of further rate cuts, at least continuing to push down short-term US Treasury bond yields. From the perspective of "long-term US Treasury bond yields," this can be seen as marginally positive. From the perspective of "long-term US Treasury bond yields," first is the demand-side support. Large banks like JPMorgan Chase increasing their holdings of US Treasury bonds often lead to substantial "buy-side" follow-up, raising bond prices and lowering yields, which is directionally positive for long-term US Treasury bond yields (such as the 10-year bond). Moreover, the open (or market-interpreted) positioning of large banks in anticipation of rate cuts/declining interest rates will strengthen expectations of low interest rates, which is overall favorable for the US Treasury bond yield curve (especially the front-end, while the long-end is influenced by both market expectations and term premiums). According to statistics from the "CME Federal Reserve Watch Tool," interest rate futures traders are generally betting that the Federal Reserve will cut interest rates twice in 2026, with an expected total cut of 50 basis points. In contrast, JPMorgan Chase's economics team recently stated in their annual report that they expect the Federal Reserve to only cut interest rates once next year (expected to occur in January), significantly less than the market's widely expected 50 basis points. Philip Marey, a senior strategist at Dutch cooperative bank Rabobank, recently pointed out that in order to stimulate the economy before the US midterm elections, the Federal Reserve is expected to lower interest rates to neutral levels or even lower by November 2026. This strategist stated that considering the lag in the transmission of monetary policy, the Federal Reserve's rate cut measures need to be completed by October in order to affect the November midterm elections. Therefore, under political pressure from the Trump administration, the Federal Reserve may lower interest rates to 2.75%-3.00% by September 2026, equivalent to three 25-basis-point rate cuts - significantly higher than the Fed's dot plot showing an interest rate mid-value expectation of only one rate cut in 2026.