Liquidity Shortage Getting Worse: Fed’s Repo Oversubcribed Even More As Funding Demand Jumps
- Liquidity Shortage Getting Worse: Fed’s Repo Oversubcribed Even More As Funding Demand Jumps
by Tyler Durden, https://www.zerohedge.com/
For those hoping that the funding crunch would ease on the third day after the overnight repo rate exploded as high as 10%, we have bad news: it did not.
As we warned earlier today, when we previewed the result of today’s repo outcome, the only question would be whether the amount of bids submitted into today’s operation would be higher or lower than yesterday’s $80.05BN to get a sense of whether the funding pressure is easing. The answer: with $83.875 in total bids submitted, not only was the operation oversubscribed again, but the total liquidity shortfall rose by almost $4 billion compared to Wednesday morning.
Furthermore, the fact that the operation was again oversubscribed means that once again there was one or more participants who did not get up to €9 billion in the critical liquidity they needed, and that the Fed will see a chorus of demands by everyone (because like with the discount window, nobody will dare to be singled out) to either expand the size of its operations, implement a fixed operation and/or transition to permanent open market operations, i.e. QE, as Powell hinted he may do yesterday.