Loading ...One final practical implication: since the market is now convinced it urgently needs the Fed to restart POMOs, expect another “near-death” event for the repo market some time in October/early November, which will be the catalyst forcing the John Williams Fed to move beyond mere repos and activate POMOs as the liquidity-injecting operation of choice.
And with that, QE4 will have arrived.
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In short, despite the generous use of the $75 billion overnight repo, it wasn’t enough, and STIR and repo traders were spooked enough to force the Fed to engage in yet another form of liquidity injection, in the form of term repos.