Reverse Repo Overnight Lending Chart - Update for May 27 2021

𝗦𝗽𝗲𝗰𝘂𝗹𝗮𝘁𝗶𝗼𝗻

Latest from the NY Fed Desk, $485B in reverse repo treasury lending with 50 counterparties. The update exactly matched the curve from the last few days, with R2 increasing to 0.95 from 0.93. Showing $1T by June 10. See below for what this means and how it might relate to GME.

Linear for my fellow stats nerds. It seems to be growing above linear and the R value is lower:

Quick reminder: there is no $500B limit on Reverse Repo treasury lending. There is, however, an $80B limit per participant, so individual banks may start ‘running out’ of Treasuries to lend onward to their hedgie friends.

Useful links

• DD into Repo/Reverse Repo for those who are curious: https://www.reddit.com/r/DDintoGME/comments/nlbsgy/the_fed_repo_market_and_overleveraged_equities/

• Source of Fed Repo/Reverse Repo data: https://apps.newyorkfed.org/markets/autorates/temp

• Some great DD on the true limit of the reverse repo by u/BlindasBalls: https://www.reddit.com/r/DDintoGME/comments/nkmoi9/response_to_the_post_about_the_reverse_repo_limit/

• Helpful/hilarious explainer on the Reverse Repo situation: https://www.reddit.com/r/Superstonk/comments/nixxvc/fed_is_in_a_pickle_economy_is_fuk_edition/?utm_source=share&utm_medium=ios_app&utm_name=iossmf

If you want to see my charts from the last few days, they’re on my post wall: https://www.reddit.com/user/HODLTheLineMyFriend/posts/

Keep on HODLin’, friends! 🚀🚀🚀

Edit:

Our friend u/wehadmagnets was kind enough to get the walled FT article for me “US investors park cash at Fed as market wrestles with negative yields” from here: https://www.ft.com/content/cdec7f2e-6129-412c-b118-8906a2a0f92f.

TA;DR:

• Today’s Reverse Repo was the largest ever

• “Investors” (more than just banks) are seeking places to park cash, as other ‘safe’ places are drying up and/or having zero or negative rates

• “It is also not over yet.” – analyst at Oxford Economics

• Cash reserves ballooning due to “the Fed’s purchases of $120bn of Treasuries and agency mortgage-backed securities each month”

• Money-market funds are getting swamped with people’s cash (flight from equities?)

• Fed is trying to avoid negative rates in money market

• No one thinks it’s over

• Fed may have to raise interest rates on RRP or reserve balances in member banks to keep the federal funds rates from going lower (at 0.06 on target of 0.0-0.25)

Edit 2:

One more tweak, u/leisure_rules noted that the $120B is $120b total, $80b in T-Bonds and $40b in MBS (Mortgage Backed Securities).

Um… could those be the Commercial MBS we’ve been hearing about that are toxic?