- Dollar Funding Shortage Accelerates As Both Overnight And Term Repo Oversubscribed
by Tyler Durden, https://www.zerohedge.com/
Update: Half an hour after the NY Fed announced that its first $30BN term repo operation was more than 2x oversubscribed (see commentary below), the results of the now daily overnight repo operation were also published, and confirmed that the liquidity shortage is getting worse again, as the $75BN operation was modestly oversubscribed, as $80.2BN in submissions were tendered.
Specifically, the total Treasury notional submitted for repo was $58.8BN up $9BN from yesterday, Agency securities tendered were a modest $0.6BN, while the amount of MBS rose to $20.85BN, up from $15.45BN, with only $15.89 accepted.
As a reminder, yesterday’s $75BN overnight repo received only $65.7BN in submissions, confirming that all those “explanations” that the funding shortfall would disappear once the tax payment and bill settlement were absorbed, were false…
… and instead, the funding shortage is once again getting worse. In fact, adding across the overnight and term repo ops, there was a total $142BN funding need today, the highest yet! Furthermore, we now expect even more submissions into the next 2 two week term repos, which could push the total liquidity injection to a high of $165BN by the end of the week.
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The NY Fed’s first term repo operation in over a decade, which has a 14 day term and thus captures the liquidity-draining quarter end period, has just concluded, and it confirmed that banks are hunkering down ahead of quarter-end, by tendering some $62BN in securities for the $30BN operation, making it more than 2x oversubscribed.