REPORT: FED SET TO
DUMP $500 BILLION INTO
REPO MARKET TO AVOID
If True, This Will Increase The Fed’s Balance Sheet Beyond Its All-Time High Of $4.5 Trillion.
12 December, 2019
The New York Federal Reserve Bank has announced that it will be dumping a previously unfathomable amount of money into the liquidity market beginning Friday.
The Fed’s statement reads:
“In accordance with the most recent [Federal Open Market Committee] directive, the Desk will conduct repo operations to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures around year end that could adversely affect policy implementation.
“The Desk will continue to offer two-week term repo operations twice per week, four of which span year end. In addition, the Desk will also offer another longer-maturity term repo operation that spans year end. The amount offered in this operation will be at least $50 billion.
“Overnight repo operations will continue to be held each day. On December 31, 2019 and January 2, 2020, the overnight repo offering will increase to at least $150 billion. In addition, on December 30, 2019, the Desk will offer a $75 billion repo that settles on December 31, 2019 and matures on January 2, 2020.
“The Desk intends to adjust the timing and amounts of repo operations as needed to mitigate the risk of money market pressures that could adversely affect policy implementation, consistent with the directive from the FOMC.”
Translation: The New York Fed will continue to offer two-week term repurchase operations twice per week. Four of those will span the end of the year. It will also offer one more longer-term “repo” operation that also spans the end of the year. That operation will be at least $50 billion.
Also, in order to prevent an avalanche of liquidity issues to end the year, the Fed will continue its daily repo operations through the end of the year. The amount that will be offered each night will be increased to $150 billion. Additionally, there will be a $50 billion term repo, followed by daily $35 billion repo offerings, which will total $365 billion.
Adding in $50 billion for the expanded overnight repo, and another $60 billion in T-bill purchases, the total injection in the next 30 days will be $500 billion. Added to the current Fed balance sheet, by mid-January, it will hold more than its all-time high of $4.5 trillion.
(Photo Credit: Jericho/Wikimedia Commons)
See also -
"Massive...Huge... Largest Ever": Fed Will Flood Market With Gargantuan$500 Billion In Liquidity To Avoid Year-End Repo Crisis