So it seems the Fed will continue to hike rates in the near future. The Fed announced this morning that it will be doing another $10 billion per month in bond purchases until the unemployment rate falls to 6.5%.
The Fed’s Daily Taper, which has been a constant during the past 70 months, was officially announced Tuesday morning. The statement from the FOMC focused on the effects on the economy from the Fed’s tapering of the bond buying program. The statement also found that the Fed would continue to reduce its balance sheet through monthly reverse repo operations through September. As a result of these operations, the Fed sold nearly $432 billion in MBS and Treasuries in July, which brought its total sales in 2013 to over $1.3 trillion and reduced its holdings by more than $1.7 trillion from their peak in September 2011.
Today the Federal Reserve Bank of New York (FRBNY) auctioned back $432 billion in bonds, thereby ending its third round of monthly reverse repos. The FRBNY announced that it will proceed with a fourth round of reverse repos on April 22, and a fifth round of reverse repos on May 5. These new reverse repos amount to a reduction of $43 billion from the amount originally planned in the March 26 reverse repo. For context, the FRBNY currently implements $12 billion in reverse repos each month.Well before Covid-19, the Federal Reserve began implementing monetary easing, after which the M1 money supply rose sharply to historically unprecedented levels. Over the weekend, it was reported that the US Federal Reserve (Fed) began to wind down its quantitative easing (QE), withdrawing $351 billion from the market last week. On Tuesday, the Fed announced a $432.9 billion reverse repo transaction.
- The 22nd. In May, Bitcoin.com News reported that the Federal Reserve launched a one-day, $351 billion reverse repo. The recently released repo data for Tuesday showed an increase of 23.07%.
- RRP fund transactions are the opposite of quantitative easing, as the Federal Reserve withdraws M1 from the system by selling Treasury securities back into the market. Recent overnight trading appears to be limited to government bonds, as there has been no purchase of mortgage-backed securities (MBS).
- Following the $351 billion RRP operation, the Federal Reserve provided $369 billion on Friday and $395 billion on Monday.
- The Federal Reserve said Tuesday that $432.9 billion has been taken out of financial markets.
- As the Federal Reserve conducts reverse repo operations, speculators assume that the central bank will continue to increase withdrawals from M1. The Fed’s $432.955 billion in repurchase agreements with 48 counterparties The repo market is still broken, broken. Tomorrow we pass the 500 billion mark, one person tweeted on Tuesday.
- On Monday, Scott Skyrm, executive vice president of fixed income and repos at Curvature Securities, gave Market Watch columnist Joy Wiltermuth his thoughts on the repo situation. Why are they turning to the Fed? Skyrm asks. Either too much cash or not enough collateral. These are two sides of the same coin, he added.
- The BTIG investigation team, led by Julian Emanuel, described the situation as a cat-and-mouse game, the Wiltermuth report concluded.
- It is estimated that the growth of the Fed’s M1 alone will surpass two centuries of U.S. dollar creation by 2020. An estimated 24-30% of all US dollars were created in 2020 and the first quarter of 2021.
What do you think of the Fed’s reverse repo operations in recent days? Let us know what you think in the comments below.
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