Demand for the Federal Reserve's reverse repurchase (RRP) facility has surged in the last few weeks, as the U.S. Treasury Department's reduced supply of short-term bills left investors few options to park excess cash.
Reverse repos are conducted by the New York Fed's Open Market Trading Desk. In a reverse repo, market participants lend cash to the Fed, usually overnight, at an interest rate of 80 basis points, in exchange for Treasuries or other government securities, with a promise to buy them back.
The Fed's reverse repo window attracted a record $2.045 trillion on Monday, as financial institutions continued to flood the facility with liquidity in exchange for Treasury collateral. Monday's volume was one of a string of record highs for RRPs.This compares with the current 51 basis point yield of U.S. one-month bills , whose longer maturity carries more risk.
Cash from Fannie Mae and Freddie Mac typically enters the repo market on the 18th of each month when they receive principal and interest mortgage payments from home lenders. GSEs then pay mortgage-backed security holders around the 24th to the 25th of the month, withdrawing that cash from the repo market to pay MBS holders.As the U.S. budget deficit shrinks amid robust tax revenues, the Treasury will have to aggressively shrink bill issuance through Sept. 30, analysts said.
The soaring RRP volume does not seem to be a concern for the Fed given that quantitative tightening will only begin next month. But it could be a problem if demand persists even after the Fed's asset portfolio starts to shrink, said Lou Crandall, chief economist at money market research firm Wrightson.
Deutschland Neuesten Nachrichten, Deutschland Schlagzeilen
Similar News:Sie können auch ähnliche Nachrichten wie diese lesen, die wir aus anderen Nachrichtenquellen gesammelt haben.
Biden considers tapping emergency diesel reserve with prices near record highWhite House officials have prepared an emergency declaration that would allow President Biden to release diesel from the Northeast Home Heating Oil Reserve as prices soar.
Weiterlesen »
Oil edges higher on fuel demand but Chinese demand still a concernOil ticks higher Tuesday morning as investors weigh tight supplies of fuel versus concerns around China COVID-19 lockdowns.
Weiterlesen »
Copper retreats from two-week top on concerns over China demandCopper prices on COMEX ease from a 12-day high as market sentiment dwindles amid mixed clues during early Monday. That said, the Copper futures on COM
Weiterlesen »
WSJ News Exclusive | Monkeypox Outbreak Stokes Global Demand for Smallpox VaccineThe maker of a smallpox vaccine that works against monkeypox is ramping up production amid a widening outbreak of the rare viral disease that has reached at least a dozen countries
Weiterlesen »
South Bay police department unveils new electric patrol cars - KCBS Radio: On-Demand - Omny.fmThe Menlo Park Police Department has taken delivery of what will be its first three electric patrol cars. KCBS Radio's Margie Shafer reports from Menlo Park, police volunteers will be part of a pilot program to test the Tesla Y's as patrol vehicles.
Weiterlesen »