Fed’s Reverse Repos Hit $503 Billion. Liquidity Drain Undoing Over 4 Months of QE

by Wolf Richter
Wolf Street

New York Fed’s Williams prepares markets for “technical adjustments” to the Fed’s “administered interest rates” to get a handle on this phenomenon.

The Fed sold a record $503 billion in Treasury securities this morning via overnight “reverse repos” (RRP) to 59 counterparties, and thereby took in $503 billion in cash from the counterparties. These overnight RRPs will mature and unwind tomorrow. Yesterday’s record $497 billion in overnight RRPs matured this morning and were replaced by this new and even larger flood.

“Reverse repos” are the opposite of “repos.” They drain cash from the market and are liabilities on the Fed’s balance sheet – money the Fed owes the counterparties.

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