/biz/ - Business & Finance

I fucking knew it. https://www.newyorkfed.org/markets/opolicy/operating_policy_200309

Fed is now spinning on a dime again. Overnight operation cap emergency increase from $100b to $150b. 2-week term repo cap increased from $20b to $45b.

Their whole story the last few months has been
>We'll only need this until April!
>We're rolling back the size of operations over time
>See? Repo is contained!!

Markets called their bluff, and Fed capitulated. The money printing will never stop

>>17552372
>>17552388
>>17552438
These are the latest repo operations from this morning. Recently the overnight operations have been creeping up, from the 30s to the 40s to the 50s (in billions of $).

The 2-week term repos are more interesting because these are the operations where the banks don't have to pay back or rollover the principal for 2 weeks. Recently these operations have gone back to being oversubscribed, meaning that the Fed was capping it at $25 billion, but the banks needed much more. The last 2-week term was last Thursday and was almost 2x oversubscribed.

Well today was a complete blowout. The overnight repo was actually oversubscribed, which hasn't happened since way back in September/October when the repo crisis started. $108.6b submitted, only $100b accepted. Meanwhile this was the first day of a continued reduction in term repos, the 2-week was reduced from a cap of $25b to $20b. And that was blowout oversubscribed too, over 3.5x. $70.9b submitted, only $20b accepted.

The Fed is trying to stick to its story of "repo is contained, we are rolling back the injections". But the banks are calling its bluff in a big way and suggesting that the crisis was never resolved. If this continues the effective funds rate will spike again like it did in September, and the Fed will be forced to reverse course again and increase the liquidity injections. It's either that or let the lending market grind to a halt like it did during the GFC.

You can go here to view the historical data https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000