JPMorgan Chase moved virtually $350 billion out of its Federal Reserve account and pushed most of that cash into U.S. Treasuries, because the financial institution reacted to rate of interest cuts this 12 months.
JPMorgan’s SEC filings on Wednesday confirmed that its Fed stability dropped from $409 billion on the finish of 2023 to $63 billion within the third quarter of 2025, whereas its Treasury holdings grew from $231 billion to $450 billion over the identical interval.
JPMorgan, which controls greater than $4 trillion in property, made this transfer after the Fed lower charges this month to the bottom degree in three years.
The cuts adopted a interval when the Fed raised charges from close to zero to above 5 p.c between 2022 and early 2023, then started decreasing them in late 2024.
Monitoring how the financial institution redirects money as fee cuts proceed
Invoice Moreland, the founding father of BankRegData, stated, “It’s clear JPMorgan is migrating cash on the Fed to Treasuries. Charges are taking place, and so they’re front-running.”
Usually, JPMorgan doesn’t give particulars concerning the maturities of the Treasuries it holds or any rate of interest swap contracts it could use for danger management.
The financial institution had averted giant long-term bond positions in 2020 and 2021 when charges have been low. That averted the massive paper losses that hit rivals similar to Financial institution of America when the Fed raised charges quick in 2022.
JPMorgan then earned extra on money stored on the Fed than it paid out to prospects due to secure deposits that didn’t transfer even through the tightening cycle. Its transfer into Treasuries earlier than fee cuts helped it lock in increased yields and keep away from decrease earnings as charges stored falling.
The broader influence of JPMorgan’s choice throughout the banking system because the Fed lowers charges
The scale of JPMorgan’s withdrawals was so giant that it offset modifications in Fed balances from greater than 4,000 different U.S. banks. Whole balances held by all banks fell from $1.9 trillion to $1.6 trillion for the reason that begin of 2024.
Banks have earned curiosity on money on the Fed since 2008, which allowed the central financial institution to handle short-term charges. These funds reached $186.5 billion in 2024 as excessive charges stayed in place earlier than the cuts.
Political strain additionally constructed round these funds.
The Senate rejected a invoice in October that aimed to cease the Fed from paying curiosity on reserve balances. Senator Rand Paul, who led the push, stated the Fed was paying “tons of of billions of {dollars} to banks to maintain cash idle.”
Rand’s argument was backed by Republican senators Ted Cruz and Rick Scott, who additionally opposed the funds.
Rand launched a report earlier this month saying the highest 20 banks earned $305 billion in curiosity on reserves since 2013. JPMorgan acquired $15 billion of that in 2024 whereas reporting $58.5 billion in full-year revenue.
