I'm aware that it's only for securities owned before 3/12/23 and limited to $25B. But that's not the point. It's now a precedent. And the market acts in anticipation of future moves like this.

If a bank gets in trouble because of treasuries that are underwater, the Fed is signaling it will do this again. Now every bank is going to load up so they can get the same treatment.

There's some uncertainty, of course, which is why yields are not 0%, but there's enough sentiment that this will be a new Fed policy tool that yields are going down fast.