The Fed & Their Reverse Repo Operations
280 sats \ 6 comments \ @sn 29 Jun 2022 bitcoin
The Federal Reserve publishes daily updates to their Reverse Repo Operations, and their all-time chart is absolutely staggering. They topped $1 trillion per day in 2021 for the first time ever, and are now well above $2 trillion per day, showing no signs of slowing down.
The description of the metric says: "The New York Fed conducts repo and reverse repo operations each day as a means to help keep the federal funds rate in the target range set by the Federal Open Market Committee (FOMC)."
  • Is this an early indicator that the Federal Reserve is struggling to keep interest rates in their target range?
  • How much larger could this repo/reverse repo market grow before something breaks?
  • What might be the first thing to break and what will the consequences be?
This is a notoriously opaque topic, so drop any/all additional context on how repo markets work in the comments below!
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130 sats \ 0 replies \ @jp 29 Jun 2022
Reverse repos are used for short term lending, typically a sign that banks have no utility for this cash and would rather lend it back to the government vs holding it on their balance sheet; this indicates that banks either cannot find credit worthy borrowers (e.g borrowers currently high debt-to-income ratios) or cannot find asset classes that they are willing to invest additional capital in (e.g. inflated asset prices)
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100 sats \ 1 reply \ @faithandcredit 29 Jun 2022
It means recession imo. The money is being parked and not doing anything. It means recession short term. I wonder how much of it is from overseas because if this was in europe they would do negative rates to incentivize the money to not stand still. Sooner or later the money will probably go back into markets and investing on its own i think, its just waiting for a bottom i think.
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2 sats \ 0 replies \ @analogue 29 Jun 2022 freebie
But then, won't it add to the inflation?
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100 sats \ 0 replies \ @zuspotirko 29 Jun 2022
Sooo .... the @sn account is posting like normal content post posts now?
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90 sats \ 0 replies \ @uco 29 Jun 2022
Just my pleb opinion but I think the first signs of trouble are going to appear in the Bond market. Large bond holders who don't want to be left "holding the bag" when the music stops will start pulling out of the bond market. Think run on the bond market when investors lose faith.
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70 sats \ 0 replies \ @super_testnet 30 Jun 2022 freebie
One thing I've heard is that the money in reverse repo operations is recycled. So they are not injecting a fresh 2 trillion dollars into the reverse repo market every day, they get the 2 trillion dollars back from the borrowers each day and then put it back in the next day.
It's still bonkers that the market needs a daily bailout, and the size of the bailout is growing, but it's easy to read that and think they are printing trillions of fresh dollars daily for each bailout -- which would be yet more insane -- and that's not what they are doing.
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