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U.S. Fed accepts $756B in daily reverse repo operation

reuters.com

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Re: U.S. Fed accepts $756B in daily reverse repo operation

#11

Post by wtn »

guffaw5 wrote: post #7
Zelphyr wrote: post #2

Can 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

The immediate situation is a problem of money market funds having more inflows than they could allocate (without nominal losses) in a zero interest rate environment. It's not about inflation per se.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#12

Post by eightysixfour »

ganoushoreilly wrote: post #6
Zelphyr wrote: post #2

Can 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.

The jump is substantial because the Fed raised the interest rate on overnight reverse repos from 0% to .05%, so the demand skyrocketed.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#13

Post by izend »

eightysixfour wrote: post #12
ganoushoreilly wrote: post #6

Earlier quoted context omitted.

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.

The jump is substantial because the Fed raised the interest rate on overnight reverse repos from 0% to .05%, so the demand skyrocketed.

Note you are off by a magnitude:

"as it raised the rate on its overnight Reverse Repo facility from 0% to 0.05%"

Re: U.S. Fed accepts $756B in daily reverse repo operation

#14

Post by enraged_camel »

This might be an unpopular opinion, but the economy we have right now feels quite fake, for lack of a better word, in the sense that the official numbers that are reported don't seem to reflect its actual health. I find it deeply concerning that every warning sign is summarily dismissed as "transitory" and the government and the Fed continue to drive full speed ahead.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#15

Post by ffggvv »

guffaw5 wrote: post #7
Zelphyr wrote: post #2

Can 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

that doesn’t really explain why they’d give the fed money for 0 percent interest if they are worried about inflation

Re: U.S. Fed accepts $756B in daily reverse repo operation

#16

Post by onlyrealcuzzo »

izend wrote: post #13
eightysixfour wrote: post #12

Earlier quoted context omitted.

The jump is substantial because the Fed raised the interest rate on overnight reverse repos from 0% to .05%, so the demand skyrocketed.

Note you are off by a magnitude: "as it raised the rate on its overnight Reverse Repo facility from 0% to 0.05%"

That is an annualized rate, right?!

Re: U.S. Fed accepts $756B in daily reverse repo operation

#17

Post by babaganoosh89 »

enraged_camel wrote: post #14

This might be an unpopular opinion, but the economy we have right now feels quite fake, for lack of a better word, in the sense that the official numbers that are reported don't seem to reflect its actual health. I find it deeply concerning that every warning sign is summarily dismissed as "transitory" and the government and the Fed continue to drive full speed ahead.

That's what 0% interest rates are like. Limitless amounts of money as long as the economy has enough confidence to use it.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#18

Post by MrStonedOne »

guffaw5 wrote: post #7
Zelphyr wrote: post #2

Can 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

That does not explain what a reverse repo is.
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