NY Fed Updates RRP Counterparties
The Federal Reserve Bank of New York announced some changes to its "Reverse Repo Counterparties List" to reflect recent money market fund conversions by BlackRock and others. (See the end of our Jan. 6 News, "Invesco's Katz Retiring, Wong Moves Up; Rate Path; BlackRock Shifts.") The counterparty changes include: "BlackRock Advisors, LLC, changed Master Institutional Portfolio to Master Government Institutional Portfolio and Master Premier Institutional Portfolio to Master Premier Government Institutional Portfolio, effective January 4, 2016." Also, there were some Fidelity name changes: "Fidelity Newbury Street Trust: Treasury Fund changed its name to Fidelity Newbury Street Trust: Fidelity Treasury Money Market Fund, effective December 30, 2015." Here is a link to the full Reverse Repo Counterparties List." In related news, the NY Fed awarded $169.6 billion in reverse repo on Tuesday, January 5. In the story, "US Fed Awards $169.62 Bln Reverse Repos," Reuters writes, "The Federal Reserve on Tuesday awarded $169.62 billion of one-day fixed-rate reverse repurchase agreements to 55 bidders at an interest rate of 0.25 percent, the New York Fed said on its website. The reverse repurchase agreement program is seen as a critical policy tool for the Fed to drain money from the financial system in an effort to achieve its interest rate objectives. On Monday, the Fed allotted $199.67 billion in one-day reverse repos to 66 bidders, including Wall Street dealers, money market mutual funds and mortgage finance agencies, also at an interest rate of 0.25 percent." This is down from a record high of $474.6 billion on December 31. Of the RRP spike, website Seeking Alpha writes, "Money Market Distortions At Year-End." It says, "On December 31, overnight reverse repo transactions with the Fed spiked to a record $475 billion.... Originally capped at a maximum of $300 billion, the RR facility has been expanded to a maximum of $2 trillion after the rate hike of December 16, which seemingly underscores its primary function as a tool to remove excess liquidity.... Something slightly curious happened at the end of the fourth quarter though. Apart from overnight reverse repo transactions reaching a record high, the federal funds rate apparently nosedived from 35 basis points to just 12 basis points on December 31, way below the Fed's target range, while the general collateral repo rate concurrently spiked to a multi-year high."
