Thursday, September 26, 2019

Here Comes The Repo Man

Remember last week when the Fed had to step in with $53 billion in overnight lending to keep the money markets from imploding?  That problem is continuing, and the Fed has now poured in more than a quarter-trillion dollars last week to keep interest rates from going under and another $105 billion Tuesday.

The Federal Reserve added $105 billion to the nation's financial system on Tuesday in two transactions, seeking to calm money markets and keep interest rates in its intended range. 
The New York Fed continued its streak of market repurchase agreements, or repos, selling $75 billion of overnight repos and $30 billion of repos expiring in 14 days. Banks bid for $80.2 billion in overnight repos and $62 billion in 14-day repos, signaling strong demand in the government-backed investments. 
Last week marked the first time in a decade that the bank had taken such steps to relieve pressure on money markets. The bank offered a total of $278 billion in repos from Tuesday through Friday.

This is a massive economic system alarm bell, and it's happening while Trump is currently got his orange thumb up his ass over Ukraine.

Also last week, the Federal Open Market Committee cut its benchmark interest rate by a quarter of a percentage point, landing in a window of 1.75% to 2%. Fed Chairman Jerome Powell called the repo offerings a temporary action. 
"Funding pressures in money markets were elevated this week, and the effective federal funds rate rose above the top of its target range," he said. 
The Fed's schedule calls for another $75 billion of overnight repos to be sold every business day until October 10, with certain days also offering at least $30 billion worth of 14-day repos.

So the Fed will have added more than one trillion dollars to its asset sheets in four weeks.  The lender of last resort is currently doing just that, and it's the only thing keeping our economy from imploding into a mess right now.

This is on top of impeachment, US troops in Saudi Arabia and the UAE, the Brexit mess in the UK and Israel still unable to form a government.  September 2019 is the month where the wheels came off, guys. I don't know where we're headed from here, but it's not going to be a fun rest of the year, I guarantee it. It definitely feels like 2008 and 1974 had Rosemary's Baby.

I gotta baaaaaaaad feelin' about this...

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