Repurchase Agreement September 2019

The repo rate rose in mid-September 2019 to 10 percent intraday, and even then, financial institutions with excess liquidity refused to lend. This rise was unusual because the repo rate is usually traded in line with the Federal Reserve`s key rate, at which banks lend each other reserves overnight. The Fed`s target at the time for the Fed Funds rate was between 2 and 2.25 percent; The volatility of the repo market has lowered the effective policy rate in its target area to 2.30%. Rests allow the Federal Reserve to slowly bring money into the economy while observing the reaction of the markets. The planned repo offers give time to adapt the directives, as well as the short-term nature of the agreements. Instead of maturing over a period of months or years, these night deals are not negotiated and their value does not vary. 5. See the FOMC announcement (www.federalreserve.gov/newsevents/pressreleases/monetary20191011a.htm) and the corresponding Desks statement (www.newyorkfed.org/markets/opolicy/operating_policy_191011). Return to text Note: Daily impressions of SOFR and EFFR from December 1, 2015 to September 30, 2019. On September 17, SOFR`s volume reached $1.18 trillion, an increase of $20 billion from the previous day.2 Based on microdata on the triparty segment of the pension market, we compare the behavior of borrowers and lenders in mid-September with typical market dynamics, previously observed in 2019. In the Triparty segment of the market, merchant borrowing was stable during the week of September 16, although interest rates rose.

Charts 6 and 7 show the transactional amounts and associated interest rates of borrowers or lenders on September 16 (blue dots) and September 17, respectively. September (red triangles) and annual averages (green squares). As can be seen from these figures, the amounts paid by the institutions on 16 and 17 September were very similar to those on normal days. Anbil, Sriya, Alyssa Anderson and Zeynep Senyuz (2020). “What happened on the money markets in September 2019?” says FEDS. Washington: Board of Governors of the Federal Reserve System, February 27, 2020, doi.org/10.17016/2380-7172.2527. The New York Federal Reserve is in its second week of offering market buyback agreements. The operations known as rest are aimed at reassuring money markets and bringing interest rates into the area envisaged by the Central Bank. After injecting $53 billion into banks on Sept. 17 and replacing the interbank market and other private lenders, the Fed made new liquidity injections every day, bringing the amount to a daily maximum of $75 billion from day two and then to a maximum of $100 billion.

At the time of the letter, the Fed continues its daily interventions and has announced that it will not do so until November 4 at the earliest. (See Bloomberg TV interview: www.bloomberg.com/news/articles/2019-10-04/new-york-fed-extends-its-repo-operations-through-october). It was also clarified that government assets that are offered and then repurchased include government bonds, agency debt, and agency mortgage-backed securities More details on each repo offer are released every afternoon for the next day`s operation, according to the Fed. . . .