Reverse Repo Madness

Is this the work of a serious artist?

And here’s Tyler showing you what’s ahead:

RRP volume is quickly approaching $1 trillion a day, with today’s reverse repo usage hitting the second highest on record at $987.3 billion and just shy of $1 trillion.

And with QE still running at $120 billion a month, the Fed continues to inject liquidity into the markets, which then continues to recycle back to the Fed via the RRP facility.

So how big will the Fed’s reverse repo facility get? As Curvature’s Scott Skyrm calculates, assuming QE will not change between now and the end of the year, it is about to get much bigger.

During the month of April, RRP volume increased by $49 billion. $296 billion during the month of May, $362 billion* in June, and $124 billion in July. If RRP volume continues around the same pace, say $200 billion a month, RRP volume will reach $2 trillion by the end of the year.

Looking at the trendline, it puts RRP volume at $2.5 trillion by the end of the year. However, RRP volume at the end of the year will be a large number, meaning it could very well approach $3 trillion by year end.

A few rhetorical questions to conclude: what will be the impact of $2 trillion going into the RRP each day? How will this affect the markets? Will the Fed need to adjust the RRP rate again?

I’m finding the wisdom of Hunter Thompson’s view of life increasingly applicable to the “gonzo economics” that is our Federal Reserve and its evil twin, the Federal Government:

  • “In a closed society where everybody’s guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity.”
  • “We can’t stop here, this is bat country!”
  • “If asked if you care about the world’s problems, look deep into the eyes of he who asks, he will never ask you again.”
Fear And Loathing Quotes Bats. QuotesGram

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: