Bank of America: Federal Reserve's adjustment of investment portfolio may bring $2 trillion to Treasury Department.

Bank of America stated that the potential adjustment in the Federal Reserve's Treasury holdings structure could lead to the central bank purchasing nearly $2 trillion in treasuries over the next two years, which would be enough to absorb almost all of the Treasury's issuance during that period. Strategists Mark Cabana and Katie Craig anticipate that the Federal Reserve will adjust its investment portfolio to better match assets and liabilities, reducing interest rate risk and negative assets, while also shortening the duration of liabilities. Ultimately, this will also provide much-needed revenue for the Treasury Department. Since raising the debt ceiling last month, the Treasury Department has issued a large amount of short-term bonds to cover the widening deficit and replenish cash balances.