The Treasury auctions settling today have led to pressure on repo markets and collateral due to the need to sell or fund inventories at dealers. The reverse repo facility has dropped significantly to new lows, with liquidity decreasing by over $80B, reaching levels not seen in nearly three years. The private repo market rates spiked, causing a large drop in overnight reverse repo, now down to just $327BN.
Nothing to see here: Reverse repo down to $327bn
USD LIQUIDITY ALERT Large drop in ON RRP yesterday as private repo market rates spiked When the ON RRP is emptied to fill a gap in private repo liquidity pools, it is obviously far less positive than when the ON RRP is emptied to fill the gap in a net/net positive bills… https://t.co/CpfSsThVFa
No surprise here: in late Q4, early Q1 liquidity flooded the system as RRP withdrawals were far in excess of QT reductions. But RRP now is down to just $327BN https://t.co/vNpG4qkjCZ
Fed's reverse repo facility plummets to lowest level in nearly three years https://t.co/ng747mSH9I https://t.co/r6Ks8RDEoH
Incoming: Liquidity RRP drops by over $80B to new lows. https://t.co/3gfOIdPKpN
Today the massive (and poorly received) Treasury auctions settle. This means Treasury receives cash from the private sector today. This means inventories at dealers must either be sold or funded. This puts pressure on repo markets and the collateral itself. Repo days matter!