Fed’s Reverse Repos Surge to Historic $485 Billion: What’s Wall Street Afraid of This Time?

by Pam Martens and Russ Martens
Wall Street on Parade

The chart above has been compiled by the St. Louis Fed using the New York Fed’s data for its issuance of Reverse Repurchase Agreements, otherwise known as Reverse Repos. What’s a Fed Reverse Repo? According to the New York Fed, it is when counterparties loan the Fed money in exchange for collateral, which is typically Treasury bills.

In the most recent action, we’re talking about the New York Fed, acting on behalf of the Federal Reserve, selling U.S. Treasuries to Wall Street banks, trading houses, mutual funds and government-sponsored enterprises in overnight and weekend deals and paying zero or next to zero as an interest rate when it buys back the securities.

Why would the smartest guys on Wall Street, who never let a loose dime slip through their fingers in order to get a larger cut of the annual bonus pool, be willing to loan the Fed money at zero percent interest? These are, after all, some of the same guys making 10-to-1 margin loans to dodgy family office hedge funds like Archegos in order to maximize fee income.

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