Discover and read the best of Twitter Threads about #IOER
Most recents (3)
/1
...pursuant to prior myths (), here's another misunderstanding debunked – most recently by the Fed itself (2021):
"the money multiplier...is anchored in an obsolete explanation of how the Fed operates and influences banks"
research.stlouisfed.org/publications/p…
...pursuant to prior myths (), here's another misunderstanding debunked – most recently by the Fed itself (2021):
"the money multiplier...is anchored in an obsolete explanation of how the Fed operates and influences banks"
research.stlouisfed.org/publications/p…
/2
...money multiplier obsoletion TLDR:
· (fractional) reserve rates were a thing until GFC 2008, and obsoletion redoubled during COVID 2020 when reserve requirements were suspended/lowered to zero
· since reserves are now abundant, POMOs and SOMAs can't influence FFR anymore
...money multiplier obsoletion TLDR:
· (fractional) reserve rates were a thing until GFC 2008, and obsoletion redoubled during COVID 2020 when reserve requirements were suspended/lowered to zero
· since reserves are now abundant, POMOs and SOMAs can't influence FFR anymore
What did saying the Fed continues to put downward pressure on long end yields via “socializing” money markets mean? Combo of standing 5bps RRP rate (was always zero) & increase of IOER to 15bps. ON repo yield EXCEEDS 3MO bills. #FED #REPO #RRP #SOFR cont…
…now MM funds have no incentive to buy bills in the free market due to standing 5bps floor. On the other side w/the IOER ceiling set @ 15bps T1 banks have built in perpetual 5bps arb borrowing @ 10bps in FF market & earning 15bps on IOER. #FED #IOER #EFFR
…I also think most would be surprised how strong the interest in RRP has become since the new rate was instituted, as well as just how many counterparties beyond T1 banks have access to the window (see current list) newyorkfed.org/markets/rrp_co… #FED #REPO #RRP
The @federalreserve has announced its decision to reinstate funding facilities for #CommercialPaper (CP) this morning, which we expected it was likely to have to do.
That’s because the #financial plumbing system has been challenged. A case in point: #volatility in overnight funding #markets was on display yesterday, with the intraday trading range for #Treasury general collateral a remarkable 300 basis points (-0.25% to 2.75%).
