As some of you may have read, or maybe I am the only one watching, the FED has announced giant sized REPO moves for the balance of the year.
I have been watching since September and the FED has done overnight repurchase agreements in the $50 to $75 billion area mostly–tossing in $15-$25 billion in 14 day repurchases agreements every 2 weeks.
Of course this is to provide liquidity to the banking system after a ‘blow out’ overnight lending rate spike of near 10% on September 15th.
Now we are 90 days later and the FED has announced they will be taking the the overnight operation to at least $150 billion. Yikes!!
I am of the thought now that this is all out on the table we will likely avert major issue—BUT there is a chance of a misstep–in particular in light of the fact that no one really seems to fully understand the market workings (certainly I don’t under stand it).
The point being is that we could see disruptions in the next 3 weeks–through the end of the year and no one should be surprised it something “breaks”.
The FED Statement of operations for the next month can be read here.