Fed $40B T-Bill Purchase Program: Market Impact Analysis Following SPY's Red Close

This analysis is based on a Bloomberg report [1] and Reddit discussions, focusing on the Federal Reserve’s $40 billion monthly short-term Treasury bill (T-bill) purchase program initiated on December 12, 2025, and its impact on the S&P 500 ETF (SPY). On the day of the program’s launch, SPY closed down 0.93% while the underlying S&P 500 index (^GSPC) fell 0.86% [0].

Bearish arguments from market participants note the $40B injection is insignificant compared to NVIDIA (NVDA)’s daily market cap change (~$151.2 billion on December 12 [0][2]) and represents only ~0.13% of the estimated $31 trillion NYSE total market capitalization [0]. Some participants, however, predict a lagged positive impact on equities, citing historical delays in liquidity injection effects on markets. The Fed’s program was announced alongside a 25 basis point rate cut, adding another layer of policy interaction to monitor [1].

1. Initial Impact Overshadowed by Sentiment
   : The program’s launch did not result in an immediate bullish market reaction, as broader sentiment drove SPY’s decline.
2. Injection Size Relative Insignificance
   : The $40B monthly purchase is small compared to daily stock market moves (e.g., NVDA’s $151.2B market cap change on December 12) and the overall NYSE market value, reducing its potential for immediate market-moving effects.
3. Liquidity Transmission Uncertainty
   : While some argue liquidity from T-bill purchases may eventually reach equities, the exact mechanism and time frame are variable and dependent on market conditions.

• Risks
  :
  • Sentiment override: Ongoing concerns about AI bubble valuations and economic growth could continue to drive market movements more than Fed liquidity actions [2].
  • Lag time uncertainty: The timing of liquidity impacts on equities is highly variable, with no guaranteed rally timeline.
  • Program duration ambiguity: The Fed has not specified how long the $40B monthly purchases will continue, limiting clarity on long-term impact.
• Opportunities
  :
  • Potential delayed rally: If liquidity successfully transmits to equities as some predict, a positive market move could occur in the coming weeks.

• On December 12, 2025, the Fed began a $40B monthly short-term T-bill purchase program to rebuild reserves [1].
• SPY and ^GSPC closed down 0.93% and 0.86% respectively on the program’s launch day [0].
• NVDA’s market cap changed by ~$151.2B on December 12, exceeding the Fed’s monthly injection size [0][2].
• The injection represents ~0.13% of the estimated NYSE total market capitalization [0].
• The program’s duration and exact liquidity transmission mechanism remain unclear [1].