- Fed Injects $104.2BN Via Overnight, Term Repos One Day After Start Of “Not A QE”
by Tyler Durden, https://www.zerohedge.com/
One day after the repo market appeared to lock up again, when the Fed’s overnight repo operation was unexpectedly oversubscribed again, for the first time since September 25, moments ago – and one day after the Fed’s first “NOT A QE” Pomo in which the Fed bought $7.5BN in a 4.3x oversubscribed open-market liquidity injecting operation – the Fed announced it had accepted over $104 billion in collateral as part of today’s overnight and term repo operations.
Specifically, the Fed accepted $67.7BN and $5.7BN in Treasury and MBS securities as part of today’s overnight repo operation, which however topped out at $73.5BN, just shy of the maximum allotment of $75BN, sparing the Fed the humiliation of explaining why liquidity conditions remains beyond strained.
Yet the clearest indication that something remains ominously broken with the repo market, came earlier today when ICAP reported that the day’s first overnight general collateral repo traded at 2.04%/2.01%, both above the upper end of the Fed Fund rate corridor, and confirming that the liquidity shortage is persisting, which prompted us to note that …
What is most concerning is that this is taking place as the Fed is now permanently increasing reserves again, which then begs the question: just why are banks so scared of lending money to each other – now that JPM’s previously discussed reticence is also spreading to smaller banks – and choose to park their money with the Fed instead? What do they know that we don’t.