Repo và Reverse Repo
Repo và Reverse Repo

Repo và Reverse Repo

Trong ngày thứ Sáu, 108 counterparties đã cho Fed vay $2.4tn thông qua nghiệp vụ Reverse Repo, với lãi suât 3.05%

Điều đáng chú ý trong năm 2019 là vì một lý do gì không rõ, lãi suất repo trên thị trường tăng vọt lên hơn 5% và Fed lập tức phải can thiệp.

Một số giải thích cho Repo:

Theo explain_shortly:

Even though inflation is scarily high, your favorite central bank is dropping ~$200M a day into the market. All thanks to Reverse Repos which hit a new record— $2.426T. Under current conditions, The Federal Reserve gives banks ~$200M a day to have ~$2.5T of banks’ liquidity removed from the market. It’s one of the Fed’s methods to fight inflation. Banks are literally getting ⅕ of trillion a day with no risk.  To fight inflation.

Repos/reverse repos are used for short-term lending and borrowing, usually overnight. The difference between repos and reverse repos is the side of the transaction you are on; you are either borrowing or lending. That’s the official definition. But let’s explain it.

Reverse repos, Fed, and banks. Usually, when a bank has more money than enough, they look for opportunities to make something out of it. Usually, they lend that extra money to other banks. It would be a shame to let this money just sit there idle.

The fed funds rate tells us at what interest banks lend money to each other. Right now it’s 3.00% – 3.25% The reverse repo rate is 3.05%.

Basically, banks could lend money to each other at a slightly higher rate compared to the fixed reverse repo rate. Even extra 0.01% makes a big difference when there are billions on the table. But there is one thing that makes banks prefer to go for lower rates.

Banks don’t trust each other. Especially during such uncertain times. Who is more likely to bankrupt; A commercial bank whose CEO drink an oat latte, or A central bank that is backed by nuclear weapons? Banks prefer to lend their money to the Fed. It’s risk-free. The rate isn’t that bad. And the Fed really wants to “borrow” banks’ money.

By borrowing money from banks, the Fed takes liquidity out of the market. It’s supposed to fight inflation. But everything has price. Even (or especially?) money.

As of now, banks parked $2,425.910B at the Fed. The rate is 3.05%. So the Fed is paying banks $74B a year to keep almost $2.5T out of the markets. That’s over $200M a day.

To summarize: The Fed fights inflation by removing as much money as possible out of circulation. Higher taxes, higher interest rates, stronger IRS. Reverse repos are one of their methods: the Federal Reserve pays banks 3.05% a year to get that money out of the market.