Listen, kids: the NY Fed injecting a modest amount of liquidity into the repo market is not a big deal. In fact - they used to do it quite a bit more when the Chinese bought every T-Bill on planet Earth and Banks were scrambling for short term Sovereign paper for collateral. Much ado about nothing. I would remind the worried about the insane QE levels we saw for several years (TRILLIONS)$$$$$$$$$$$
various factors converged to cause a temporary shortage of reserves which affected the unsecured funds market and caused rates to rise temporarily beyond the Fed target range. There was brief spillover into security secured loans in the repo market. The Fed, as they usually do, handled the situation with aplomb and brought the Funds Market rate quickly back into the target range.
Would have been very simple to obtain our buyin."We are new to ET. We'll showcase the offer and we've asked a number of our existing user to share some of the experiences. One simple paragraph in the initial posting, Instead you make it look hooky and poorly orchestrated
It’s a bit hyperbolic to call this a “bailout” since the Fed created this ‘imbalance’ - not the Banks or the traders. The Treasury will “roll” coupons - they will buy up the higher interest paying coupons and issue new lower interest coupons. In other words - the US refinances it’s debt when it’s advantageous to do so. And in this ebb and flow on occasion liquidity gaps can arise but as you’ve seen the Treasury has fantastic printing presses. It’s somewhat amusing in that an argument could be made that the Fed created the “issue” by aggressively selling off the balance of the TARP and QE assets they’ve accumulated since 2008 in just the past few years - including Sovereign Debt. And Banks were borrowing that Sovereign Debt at overnight rates to fund their operations. So, the Fed has to print up some new paper more tailored for the purpose. What’s amazing is that the Fed actually MADE money on QE and TARP. As an aside - the ECB interbank overnight lending instruments are collectively called EONIA.
These little blips are why we have a Central Bank and what it is good for, among many other things of course. I'll just throw this out for everyone's consideration. In the U.S., when you write a check, it doesn't matter whether the bank you write it on is solvent or not. Your check , assuming you've deposited money to cover it, is going to clear no matter what! It wasn't always the case that we didn't have to worry about the solvency of the bank where we kept our money. Today that is no concern thanks to our Central Bank.