The first of three scheduled 14-day term repo operations was two times oversubscribed, suggesting some folks are indeed inclined to take the Fed up on its “generous” offer to ensure the acute funding stress that rippled across money markets last week doesn’t show up again into month- and quarter-end.
Some $62 billion in securities were submitted for the $30 billion operation. The NY Fed accepted $22.7 billion of USTs and $7.27 billion of of mortgage-backed debt. No agency debt was accepted.
The Fed announced the three term ops on Friday, along with a schedule for O/N repos, all in an effort to provide clarity and reduce uncertainty following a tumultuous week.
Fed officials are working to lay the groundwork for an announcement around the resumption of balance sheet expansion, or, “QE-Lite” as it’s been dubbed in its “organic” form.
John Williams on Monday said the FOMC “will assess the implications for the appropriate level of reserves and time to resume organic growth of the balance sheet consistent with the successful execution of the FOMC’s ample reserves framework”.
For his part, Jim Bullard isn’t sure reserve scarcity was the problem last week. In remarks to reporters following a presentation in Effingham, Illinois, on Monday, he said he favors a standing repo facility to address funding stress.
“The best part about having a standing repo facility is that you probably would not have to use it most of the time because its mere existence would stabilize trading”, Bullard remarked.
You can now consider that quotable in the context of a 2X oversubscribed 14-day operation which, you’re reminded, will need to be rolled in mid-October along with the other two term operations scheduled for this week, unless the Fed is keen on upsetting markets again and chancing the return of repo volatility.
Paging John Williams pic.twitter.com/L9IUPxIxzU
— Luke Kawa (@LJKawa) September 24, 2019
|Operation Results for Tuesday, September 24, 2019
Last Updated: Tuesday, September 24, 2019 08:15 AM
Number of Operations Today: 1
|See announcement from Sept 23, 2019.
Deal Date: Tuesday, September 24, 2019