Wed Oct 23, 2019, 12:11 PM

Fed's Fourth Bill POMO ...Amid Liquidity Scramble

Fed's Fourth Bill POMO Is Most Oversubscribed Yet Amid Liquidity Scramble

One day after the Fed unexpectedly saw a surge in demand for its term-repo operation, which was oversubscribed for the first time since the mid-September repo crisis erupted, the liquidity shortage in the funding market appears to be getting worse by the day, and in today's just concluded 4th consecutive T-Bill POMO, which saw the Fed monetize another batch of Bills, Dealers submitted $44.2BN in bids for the maximum $7.5BN in Fed "Reserve Management" (note: not QE) purchases.

The results confirm that demand for the Fed's permanent liquidity injection is increasing with every operation - suggesting that not only was the September repo turmoil not a one-time liquidity event, but that that liquidity shortage is getting worse - even as usage of the Fed's latest overnight repo saw a modest decline.

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