Anyone have insight?? Comments??
Federal Reserve reverse repo facility use hits $2.091 trillion, a new all-time record. CNBC.
Am sure there is a message in this but not sure what exactly it’s saying………
Am sure there is a message in this but not sure what exactly it’s saying………
https://www.armstrongeconomics.com/markets-by-sector/interest-rates/understand-what-is-the-repo-market/
As I understand it, its a collateral issue.
Per GG, much of the QE is sequestered as Bank Reserves. It doesn’t get DIRECTLY lent out via commercial banking.
Banks make deals/swaps, as they want to hedge. They need trustworthy (choke) collateral to backstop them to meet regulatory requirements.
So the Fed lends out Treasuries each night to avoid the kind of spike in repo rates we saw in Sept 2019.
Now, why its gotten to THIS scale, versus where things stood in 2018-2019 I don’t know.
There are definitely repercussions from making Russia “technically” default and China’s Evergrande is a zombie. Those and other dislocations are going to spread and cause problems in lots of areas.