Overnight Reverse Repo at NY Fed is taking off.
Ignoring the window-dressing spike on 3/31, this sustained increase signals that the offloading of bank reserves from big banks to government money market funds has finally started.
Ignoring the window-dressing spike on 3/31, this sustained increase signals that the offloading of bank reserves from big banks to government money market funds has finally started.
This is a short-term relief valve for their balance sheet pressure.
Last time this happened, QE stopped 10 months after (Oct 2014)
Last time this happened, QE stopped 10 months after (Oct 2014)
This time, Fed may need to continue on at least with some twisting (buying 10Y-30Y bonds, while selling Tbills) for yield control purposes, as net interest expense would skyrocket otherwise.
Pressure on bank's balance sheet is likely to continue on at least into 2022.
Pressure on bank's balance sheet is likely to continue on at least into 2022.
due to the overwhelming interest on this, let me expand these data in a couple of blog articles on fed.tips in the next couple of days.
in terms of the implications for
SICO
Fed reaction function
inflation etc.
in terms of the implications for
SICO
Fed reaction function
inflation etc.
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