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December
18
2019

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

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??

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

 

I am an active investor who has been in the market for 25+ years. I focus on value, reasonably priced growth, tech and biotech spaces. I passed the series 6 and 7 exams at age 18, I work in the financial and property management industry.

 

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