The Federal Reserve published its "Minutes of the Federal Open Market Committee, November 1-​2, 2022," last week, which contained several references to money market funds and repo. Discussing "developments in money markets and Federal Reserve operations," they comment, "Usage of the overnight reverse repurchase agreement (​ON RRP) facility remained fairly steady other than during the period surrounding quarter-​end. In the period ahead, the relative pace of decline in ON RRP facility balances and reserve balances would depend importantly on shifts in money market conditions. Recent developments, including with regard to the relationship between ON RRP facility balances and money market rates, suggested that, over time, conditions could evolve in a manner that would lead to falling usage of the ON RRP facility. However, the manager pro tem noted that money market conditions could change somewhat more quickly in the lead-​up to year-​end because of normal factors, such as a Treasury tax payment date in December that could increase the Treasury General Account balance, and year-​end position adjustments. This prospect could require money market participants to be more responsive to shifting liquidity conditions and to plan ahead for the coming period. Current market quotes suggested expectations of limited upward pressure on domestic money market rates around year-​end. In offshore dollar funding markets, the premium associated with borrowing dollars was modestly higher than at similar points in previous years." The Minutes also say, "Conditions in short-​term funding markets remained stable over the intermeeting period, with the September increase in the target range for the federal funds rate and the associated increases in the Federal Reserve'​s administered rates passing through quickly to overnight money market rates. In secured markets, money market rates remained soft relative to the ON RRP offering rate, attributed to subdued Treasury bill supply, elevated demand for Treasury collateral, and investor demand for very short-​term assets amid uncertainty over the pace of policy rate increases. Daily take-​up in the ON RRP facility remained elevated amid this softness in repurchase agreement rates. Money market fund net yields rose along with the rise in administered rates, while retail bank deposit rates increased modestly on balance."

Your Name:
Your Email:
Recipient Email(s):

Use a comma or a semicolon to separate

Please retype symbols from the image:

Optional Message

Daily Link Archive