{"id":18922,"date":"2019-09-18T00:47:33","date_gmt":"2019-09-18T00:47:33","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=18922"},"modified":"2019-09-19T08:19:36","modified_gmt":"2019-09-19T08:19:36","slug":"ny-fed-conducts-first-overnight-repo-in-10-years-as-rates-surge","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2019\/09\/18\/ny-fed-conducts-first-overnight-repo-in-10-years-as-rates-surge\/","title":{"rendered":"NY Fed conducts first overnight repo in 10 years as rates surge"},"content":{"rendered":"<p>The last time that the New York Fed had to inject liquidity into financial markets via overnight repo operations was during the 2008 global financial crisis, when concerns over Bear Sterns and Lehman Bros were threatening to bring the financial system to its knees. From <a href=\"https:\/\/www.thestreet.com\/investing\/fixed-income\/ny-fed-conducts-75-billion-repo-operation-as-overnight-funding-rate-surge-15093235\">The Street<\/a>:<\/p>\n<blockquote><p>The New York branch of the U.S. Federal Reserve said Tuesday that it was prepared to add as much as $75 billion in cash to broader markets in order to hold the Fed&#8217;s key rate inside its target range.<\/p>\n<p>The so-called Repo operation, during which twenty four Primary Dealers in the Fed system can exchange eligible collateral, such as U.S. Treasury bonds or mortgage-backed securities, for cash. The move comes amid a massive surge in the price of what is known as &#8216;general collateral&#8221;, which is normally the cheapest batch of securities that banks use to pledge against cash, or other assets.<\/p>\n<p>The costs for borrowing general collateral, often referred to as GC, spiked by 2.5% on Monday, and was followed by a 6% surge today, taking the price to as high as 8.75% at one point, some 6.5% higher than the upper-end of the Fed&#8217;s target rate range.<\/p>\n<p>The Fed&#8217;s announced operation, however, pushed that overnight rate back down to 0% shortly after it was launched&#8230;.<\/p><\/blockquote>\n<p>Steven Bartholomeusz at <a href=\"https:\/\/www.theage.com.au\/business\/markets\/cash-shortage-the-plumbing-system-of-the-global-financial-system-just-sprung-a-big-leak-20190918-p52sj6.html\">The Age<\/a> suggests that the liquidity squeeze may be an anomaly:<\/p>\n<blockquote><p>\nThere was an unusual confluence of events in the past few days that may have exacerbated underlying structural problems within the market.<\/p>\n<p>US companies paid their quarterly taxes on September 15. They often prepare for the payment by parking the funds in short term money market fund accounts to generate a return.<\/p>\n<p>The payments of those taxes, estimated at more than $US100 billion, meant a large amount of cash was withdrawn from those funds, which are a source of the cash for repo deals.<\/p>\n<p>At almost the same time there was a settlement of auctions of about $US78 billion of Treasury bonds. With only about $US24 billion of bonds maturing at the same time that meant about $US54 billion of net cash was drained from the market to pay for those bonds.<\/p>\n<p>The Financial Times\u2019 Alphaville blog posited another strand to the explanation for the dollar shortage, albeit one it described as &#8220;highly speculative,\u2019\u2019 suggesting that the severe spike in oil prices after the drone attacks on Saudi Arabia\u2019s most important oil processing complex might have triggered margin calls in oil futures markets, forcing a frantic scramble for US dollar-denominated cash.\n<\/p><\/blockquote>\n<p>Quarterly tax payments are a regular occurrence and the markets are accustomed to dealing with them as part of the quarterly cycle. Large fiscal deficits causing a net issue of $54 billion in Treasuries is a more likely culprit. The first rule of margin calls is <em>never meet a margin call<\/em>, so that seems an unlikely cause, but the spike in oil prices may have impacted elsewhere on financial markets.<\/p>\n<p>We need to be on the lookout for a repeat. Demand for cash is surging. The graph of broad money (MZM plus time deposits) below shows a surge in broad money ahead of the last two recessions. And another worrying rise this year.<\/p>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-09-17-broadmoney.png?w=525&#038;ssl=1\" alt=\"Broad Money: MZM plus Time Deposits\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The last time that the New York Fed had to inject liquidity into financial markets via overnight repo operations was during the 2008 global financial crisis, when concerns over Bear Sterns and Lehman Bros were threatening to bring the financial system to its knees. From The Street: The New York branch of the U.S. Federal &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2019\/09\/18\/ny-fed-conducts-first-overnight-repo-in-10-years-as-rates-surge\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;NY Fed conducts first overnight repo in 10 years as rates surge&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[3935,1352,4125,4124],"class_list":["post-18922","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-broad-money","tag-fed","tag-general-collateral","tag-overnight-repo-operations"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>NY Fed conducts first overnight repo in 10 years as rates surge - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"NY Fed conducts first overnight repo in 10 years as rates surge - the patient investor\" \/>\n<meta property=\"og:description\" content=\"The last time that the New York Fed had to inject liquidity into financial markets via overnight repo operations was during the 2008 global financial crisis, when concerns over Bear Sterns and Lehman Bros were threatening to bring the financial system to its knees. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.","sameAs":["https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/","https:\/\/www.instagram.com\/colin_thepatientinvestor","https:\/\/au.linkedin.com\/in\/colintwiggs"],"url":"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9tQ4n-4Vc","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":25928,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/21\/rrp-a-fed-taper-by-stealth\/","url_meta":{"origin":18922,"position":0},"title":"RRP: A Fed taper by stealth","author":"Colin Twiggs","date":"May 21, 2021","format":false,"excerpt":"We will try to keep the jargon to a minimum, so that we do not get lost in the maze of financial markets. On May 20th, Tyler Durden published an article headed \"Fed Alert: Overnight Reverse Repo Usage Soars Above Covid Crisis Highs\" What is Overnight Reverse Repo? Overnight Reverse\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":63059,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/11\/13\/how-the-srf-could-blow-up-the-treasury-market\/","url_meta":{"origin":18922,"position":1},"title":"How the SRF could blow up the Treasury market","author":"Colin Twiggs","date":"November 13, 2025","format":false,"excerpt":"Key Points The Fed's Standing Repo Facility (SRF) is designed to provide backup funding to the repo market during periods of liquidity stress. The $12 trillion repo market is secured by government securities, normally USTs, and has largely replaced unsecured interbank lending. However, hedge funds are taking advantage of the\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"SOFR-FFR","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-11-12-sofr-ffr.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":62984,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/10\/30\/fed-cut-but-no-rally\/","url_meta":{"origin":18922,"position":2},"title":"Fed cut, but no rally","author":"Colin Twiggs","date":"October 30, 2025","format":false,"excerpt":"Key Points The Fed cut its funds rate target by 25 basis points and will end QT on December 1. Fed Chair Jerome Powell doused expectations for a further rate cut at the next FOMC meeting, causing rates to drift higher. ADP weekly data indicates that private sector employment is\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"ADP Weekly Private Sector Employment","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-29-adp.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-29-adp.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-29-adp.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-29-adp.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":62796,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/10\/18\/better-buckle-up\/","url_meta":{"origin":18922,"position":3},"title":"Better Buckle Up","author":"Colin Twiggs","date":"October 18, 2025","format":false,"excerpt":"Key Points Bitcoin broke through the band of support at 110K, warning of a correction. The secured overnight financing rate (SOFR) spiked above the interest rate paid on reserve balances at the Fed, warning of a sharp contraction in liquidity in financial markets. Better buckle up. Bitcoin serves as the\u2026","rel":"","context":"In &quot;Cryptocurrency&quot;","block_context":{"text":"Cryptocurrency","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/forex\/cryptocurrency\/"},"img":{"alt_text":"Bitcoin (BTC)","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-17-btc.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-17-btc.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-10-17-btc.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":63061,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/11\/14\/stocks-fall-gold-rises\/","url_meta":{"origin":18922,"position":4},"title":"Stocks fall, gold rises","author":"Colin Twiggs","date":"November 14, 2025","format":false,"excerpt":"Key Points Bitcoin broke support at 100K, signaling that financial market liquidity is contracting. Major stock indices and ETFs declined as Fed officials hosed down prospects of a December rate cut. Copper and uranium miners are falling, indicating doubts over the AI infrastructure buildout. Gold rallied to $4,200 per ounce,\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Bitcoin (BTC)","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-11-13-btc.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-11-13-btc.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-11-13-btc.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":54146,"url":"https:\/\/thepatientinvestor.com\/index.php\/2024\/06\/07\/the-fed-treasury-and-liquidity\/","url_meta":{"origin":18922,"position":5},"title":"The Fed, Treasury and liquidity","author":"Colin Twiggs","date":"June 7, 2024","format":false,"excerpt":"A reader asked me to please explain why liquidity is rising despite the Fed hiking rates and shrinking its balance sheet (QT) by more than $1.7 trillion. We will try to avoid the technical jargon and stick to the basics. But it's not always an easy concept to explain or\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Commercial Bank Reserves at the Fed","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-06-06-bankreserves.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-06-06-bankreserves.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-06-06-bankreserves.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=18922"}],"version-history":[{"count":5,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18922\/revisions"}],"predecessor-version":[{"id":18946,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/18922\/revisions\/18946"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=18922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=18922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=18922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}