Repo Madness! QE 3 ($40b a month) vs. Repo ($500b in 2 weeks)

Fed Chair Jerome Powell says it not QE, so let’s just call it REPO MADNESS (the surge in Fed activity surrounding the repo market).

QE3 had The Fed adding $40 billion per month in Treasuries and Agency MBS, then QT (quantitative tightening struck). But the fear of repo madness struck and The Fed started purchasing $60 billion of Treasury bills per month.

More specifically, The Federal Reserve Bank of New York added $86.4 billion in liquidity to financial markets. In two operations carried out Monday, the Fed injected $36.4 billion in overnight liquidity and $50 billion in 32-day liquidity extending into the coming New Year.

Eligible banks took far less than the $120 billion the Fed was willing to offer in the overnight repurchase agreements, or repo, operation, while they wanted just slightly more long-term liquidity than the Fed was offering in the longer-term repo operation. 

Eligible banks want more long-term liquidity? Does this mean more QE? Again??

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Its a good thing that US inflation is so low … except for health care insurance.

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Repo Madness!

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