U.S. Fed reverse repo volume hits record $1T
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U.S. Fed reverse repo volume hits record $1T
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Re: U.S. Fed reverse repo volume hits record $1T
#2I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
Re: U.S. Fed reverse repo volume hits record $1T
#3I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
it isn't clear what it means if anything.
basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking it overnight at the fed for close to zero interest.
the fed introduced this program to prevent interest rates from going below zero. they are essentially a floor on the market. and soaking up excess short term liquidity.
Re: U.S. Fed reverse repo volume hits record $1T
#4I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
> Can anyone better at understanding economics explain what this means to me?
Reverse repos involve banks buying securities from the Fed in the evening, with the Fed agreeing to buy them back in the morning for another price. Until recently, the first price and second price were the same. Now, the second price is 0.05% higher (annualised).
Banks are parking a trillion dollars with the Fed overnight. That’s a trillion dollars that won’t be lent, i.e. won’t contribute to growth or inflation.
Re: U.S. Fed reverse repo volume hits record $1T
#5I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
it isn't clear what it means if anything. basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking it overnight at the fed for close to zero interest. the fed introduced this program to prevent interest rates from going below zero. they are essentially a floor on the market. and soaking up excess short term liquidity.
> fed introduced this program to prevent interest rates from going below zero
FOMC repos and reverse repos predate ZIRP.
Re: U.S. Fed reverse repo volume hits record $1T
#6I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
it isn't clear what it means if anything. basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking it overnight at the fed for close to zero interest. the fed introduced this program to prevent interest rates from going below zero. they are essentially a floor on the market. and soaking up excess short term liquidity.
> it isn't clear what it means if anything
What it indicates is what the Fed knows and has already signaled: monetary policy is going to be largely ineffectual in the near term.
Re: U.S. Fed reverse repo volume hits record $1T
#7I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
Inflation with a chance of hyper.
Re: U.S. Fed reverse repo volume hits record $1T
#8Earlier quoted context omitted.
it isn't clear what it means if anything. basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking it overnight at the fed for close to zero interest. the fed introduced this program to prevent interest rates from going below zero. they are essentially a floor on the market. and soaking up excess short term liquidity.
> it isn't clear what it means if anything What it indicates is what the Fed knows and has already signaled: monetary policy is going to be largely ineffectual in the near term.
> monetary policy is going to be largely ineffectual in the near term
The failure mode you're alluding to is a Keynesian liquidity trap [1], a sibling to stagflation (inflation and demand failure): deflation and demand failure.
The American economy shows no failure of aggregate demand. (Quite the opposite.) Inflation expectations are rising. And these reverse repo data shows banks relinquishing liquidity, not hoarding it.
More pointedly, this increase resulted from the FOMC increasing reverse repo rates. That's monetary policy causing intended effects.
Re: U.S. Fed reverse repo volume hits record $1T
#9I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
> Can anyone better at understanding economics explain what this means to me? Reverse repos involve banks buying securities from the Fed in the evening, with the Fed agreeing to buy them back in the morning for another price. Until recently, the first price and second price were the same. Now, the second price is 0.05% higher (annualised). Banks are parking a trillion dollars with the Fed overnight. That’s a trillion…
Does that mean the fed is earning ~$50billion in interest a day?
That seems good for our national budget unless I'm misinterpreting it.
Re: U.S. Fed reverse repo volume hits record $1T
#10I don't even comprehend numbers that large moving that quickly. Can anyone better at understanding economics explain what this means to me?
> Can anyone better at understanding economics explain what this means to me? Reverse repos involve banks buying securities from the Fed in the evening, with the Fed agreeing to buy them back in the morning for another price. Until recently, the first price and second price were the same. Now, the second price is 0.05% higher (annualised). Banks are parking a trillion dollars with the Fed overnight. That’s a trillion…
Why exactly is the 2nd price higher? What purpose does that serve/what does it signal?