U.S. Fed's reverse repo volume surges to record half a trillion dollars

Discussion in 'Fixed Income' started by kmiklas, Jun 9, 2021.

  1. kmiklas

    kmiklas

    Is this a way to test, in the short term, what happens when liquidity is removed from the system?

    It seems counter-productive to issue QE while at the same time soaking liquidity up with reverse repos.

    What I really don't understand: if a reverse repo pays 0%, why bother... why not just hold in ca$h?

    If anyone can shed some light I'd appreciate it.

    https://www.reuters.com/article/us-usa-fed-reverse-repo-idUSKCN2DL29J
     
  2. taojaxx

    taojaxx

    kmiklas likes this.
  3. xandman

    xandman

    longandshort likes this.
  4. taojaxx

    taojaxx

    xandman likes this.
  5. Sig

    Sig

    It is pointless, and the Fed has engaged in such pointless exercises before for what presumably was the purely psychological effects of making people think there was easing going on. But this time I don't think the Fed is still engaged in QE at the moment?
     
  6. bone

    bone

    The Fed has done astonishingly well (performance wise) with their balance sheet and I could envision them selling Treasuries and rolling the proceeds into the Repo Market lending facilities - which would provide both collateral and liquidity into the primary and secondary markets. I know that they've already sold quite a bit of the Corporate Debt they purchased last Spring/Summer.
     
  7. xandman

    xandman

    Jefferson's fears realized.

    They might as well be for-profit to fund some of the deficit spending. Their own self-interest will guide them to protect the dollar.
     
  8. Zoltan thinks the Fed will unwind as the asset cap for Wells Fargo will be lifted...which would introduce $500B in demand for assets and can ease a potential taper tantrum. If they can pull it off it may be a soft landing.
     
  9. Sig

    Sig

    So the Fed buys assets and then is able to resell them for a profit....that's apparently bad.
    If the Fed had bought assets and then resold them for a loss....no doubt you'd be saying that's bad?
    Can't have it both ways.
     
  10. xandman

    xandman

    Not so much the profits. But, the level of participation that is propping up zombie firms.
     
    #10     Jul 7, 2021