U.S. Fed accepts $756B in daily reverse repo operation
1–10 of 182 posts
Re: U.S. Fed accepts $756B in daily reverse repo operation
#2Can someone provide a ELI5 for this?
Re: U.S. Fed accepts $756B in daily reverse repo operation
#3Can someone provide a ELI5 for this?
Don’t quote me on this, pretty sure I’m wrong. The Fed bought assets (with the agreement to give it back for even higher rates of return). I heard one interpretation of this being that the moneys worth less than the assets and the fed is looking for ways to incentivize financial institutions to take money.
Re: U.S. Fed accepts $756B in daily reverse repo operation
#4Can someone provide a ELI5 for this?
This was a good and simple explanation on why this might be happening: https://www.youtube.com/watch?v=O0fSPO7AW7k.
tl;dw: too much money in the system, big banks don't want the liability, push it to money market funds which use short term treasury while treasury is trying to increase their long term debt and reduce the short term ones. essentially, not as scary as it sounds.
Re: U.S. Fed accepts $756B in daily reverse repo operation
#5Can someone provide a ELI5 for this?
The world economy is a ponzi scheme played out over a very long term
Re: U.S. Fed accepts $756B in daily reverse repo operation
#6Can someone provide a ELI5 for this?
First, it's been at 500 or so for a few weeks this is a substantial jump. The previous high record was $589 on the 14th. This has never been this high.
But more than likely you need to understand what Reverse Repo is and why it impacts all of us. Here's a great ELI5 On Reddit.
https://www.reddit.com/r/investing/comments/1ixbwf/eli5_repo...
TLDR: More inflation and shakey times ahead.
Re: U.S. Fed accepts $756B in daily reverse repo operation
#7Can someone provide a ELI5 for this?
Banks have a ton of cash, and they're worried about inflation. So, they store their cash with the fed (through a repo [repurchase] agreement) temporarily.
[0] What is a repo? - https://www.richmondfed.org/publications/research/econ_focus...
[1] Repos in charts - https://fred.stlouisfed.org/series/RRPONTSYD
Re: U.S. Fed accepts $756B in daily reverse repo operation
#8Can someone provide a ELI5 for this?
Don’t quote me on this, pretty sure I’m wrong. The Fed bought assets (with the agreement to give it back for even higher rates of return). I heard one interpretation of this being that the moneys worth less than the assets and the fed is looking for ways to incentivize financial institutions to take money.
Yes, govt bonds are looked at as not reliable and the fed is incentivizing the purchase of the bonds nightly with additional interest. Problem is this is to stave off excess inflation, but it ironically will create it.
Re: U.S. Fed accepts $756B in daily reverse repo operation
#9Can someone provide a ELI5 for this?
Don’t quote me on this, pretty sure I’m wrong. The Fed bought assets (with the agreement to give it back for even higher rates of return). I heard one interpretation of this being that the moneys worth less than the assets and the fed is looking for ways to incentivize financial institutions to take money.
> the fed is looking for ways to incentivize financial institutions to take money
Right, the current situation is a money market "plumbing" issue; there are more deposits than banks can handle due to GSIB balance sheet regulations.
Here's some background info: https://fsforum.com/news/fixing-whats-broken-the-gsib-surcha...
Re: U.S. Fed accepts $756B in daily reverse repo operation
#10Can someone provide a ELI5 for this?
the banks have too much cash and not enough collateral (typically bonds). The FED lends them the bonds for one day (reverse repo) so that their books look ok at the end of the day.