Core Viewpoint - The market anticipates that the Federal Reserve may announce the end of quantitative tightening (QT) during the upcoming FOMC meeting, with Bank of America suggesting that the Fed might need to increase liquidity through the purchase of government bonds or by initiating Term Open Market Operations (TOMO) to alleviate pressures in the money market [1][4]. Group 1: Federal Reserve Actions - Bank of America expects the Federal Reserve to announce the cessation of QT at the October FOMC meeting and to initiate a plan to reinvest in government bonds using proceeds from maturing agency mortgage-backed securities (MBS) [4]. - The anticipated TOMO operations will involve overnight and term repurchase agreements, with rates set above the interest on excess reserves (IOR) by 5 and 10 basis points, respectively, and a scale of $500 billion [6][7]. Group 2: Market Implications - The TOMO operations are expected to limit the upward movement of the Secured Overnight Financing Rate (SOFR) and the General Collateral Rate (TGCR), thereby widening the spread between SOFR and the federal funds rate [7]. - Risk assets may interpret TOMO or Permanent Open Market Operations (POMO) as signals of financial easing and a resurgence in risk appetite, leading to recommendations for investors to maintain long positions in the SOFR/federal funds rate spread [7]. Group 3: Historical Context - The current expectations for TOMO operations draw parallels to the Fed's actions in 2019, where similar measures were taken in response to volatility in the repo market [6]. - The distinction between TOMO and the Standing Repo Facility (SRF) is highlighted, with TOMO being limited to primary dealers, which may reduce the stigma associated with using the SRF [6].