This is the first time I’ve seen Wall Street banks clamor for the Fed to back off QE. The Fed struggles to keep the liquidity it created from going haywire.
I think, first of all, it means that the Fed doesn't have a long term plan--they are reacting. First they "print" a shitton of money, and now they are trying to reign in/reduce that amount via fincap magic.
These reverse repos are a sign that the banking system is struggling to deal with the liquidity that the Fed has been injecting via its QE.
So with one hand, as part of QE, the Fed is buying $120 billion a month in Treasury securities and MBS. With the other hand, the Fed took back $351 billion via overnight reverse repos, undoing nearly three months of QE.
I think, first of all, it means that the Fed doesn't have a long term plan--they are reacting. First they "print" a shitton of money, and now they are trying to reign in/reduce that amount via fincap magic.
I honestly think it’s because they want to prevent inflation in the “real economy” and prevent the short term bond market from going negative.