- Repo Crisis Fades Away With Second “Undersubscribed” Turn Repo Even As Pozsar Doubles Down On Doomsday
by Tyler Durden, https://www.zerohedge.com/
It looks like the year-end repocalypse that was predicted by Credit Suisse strategist Zoltan Pozsar is not going to happen this year after all. Today’s Term Repo which matures on January 7 saw $28.8BN in security submissions ($13.85BN in TSYs, $14.95BN in MBS), below the $35BN in total availability.
As such, this was the second term repo since the start of the Fed’s emergency repo program that covered the year-end “turn” with a maturity of Jan 2, and was not fully overalotted. As shown in the chart below, the first four “turn” term repos were all oversubscribed (boxed in red), while today’s was the second “turn” repo that saw a less than full allotment.
As such, it now appears that banks have reached their fill of what they believe will be sufficient year-end liquidity, and all subsequent “turn” repos will likely see a lower allotment as the Fed’s $500BN liquidity backstop bazooka ends up being underutilized, if not by much.
In his latest comment on the repo market, Curvature’s Scott Skyrm noted that “once the term RP operations switch to being undersubscribed, it either means most of the Street’s year-end funding need is fulfilled, or banks are close to their balance sheet limits.” His full comment below: