Oddbean new post about login | logout What I'm watching... 👀 The Federal Funds Effective Rate (FFER) has been set at 5.33% since August 2023. It will almost certainly be lower by the end of the day. The FFER heavily influences short-term T-bill rates, as well as the amount and flow of money utilizing Overnight Reverse Repurchase Agreements... which is a significant component of US Net Liquidity. #macro https://m.primal.net/Ktpd.png
https://pollerama.fun/respond/e698153c160f69cdd674a2eff657b8c139fb2ffe596361d32c1c3fa14357b1aa There's a poll running 😛
I feel like there are two types of people - those who understand the repo market and those who don’t. Despite my efforts, I am the latter.
Hear hear
What are the likely results of a lower FFER, and in what way does it influence the REPO rate, explained like I’m 5 pls ser ?🙏🙃
Generally speaking, if the FFER is higher than the one month (and similar) T-bill yield, then money market funds will park their cash in the ORR facility to earn a higher short-term risk free rate. This results in a contraction of US net liquidity. Conversely, if the FFER is lower than the one month (and similar) T-bill yield, then money market funds will remove their cash from the ORR facility and buy T-bills. This results in expansion of US net liquidity.
Thank you!
Incoming: Standing overnight reverse repurchase agreement operations offering rate of 4.8%. Down from 5.3%, previously. Which has been the standing rate since August 2023. Short term (~1-3 months) T-bill yields will quickly reflect this new rate. nostr:note19th0qqm4v2vumpc8vsh2e4k5t8yj648puyufk9626tnmgt7frgps74pzpz
