Wednesday, September 25, 2019

Big Demand For Fed Term Repo

Quick post...

Yesterday the Fed provided a total of $105 billion to the repo market: $75 billion overnight and $30 billion in 14-day term repo. Both met strong demand; dealers bid for $80.2 billion in O/N and $62 billion in 14 days.

The big demand for the term repo - cover was 2.07x - is revealing, as I wrote in the previous post.  Strong demand for longer repos point to liquidity concerns.

Congressional developments concerning a possible investigation into Mr. Trump's conduct came after the market had closed.  Given that the repo liquidity shortage started a week ago, it is quite possible that the market had sterted hearing rumors early on.

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