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The Federal Reserve Reverse REPOs operations have increased in the past week to a peak of $1.35 Trillion dollars, for 78 counterparties accepting a 0.05% rate. These gigantic overnight money-market flow operations are a signal of mismatches and unbalance in the banking system, but also the concrete evidence that the Federal Reserve needs to raise Federal Fund Rates, probably in the near term, much earlier than forecast.


Increasing overnight borrowing through different money-market facilities also are evidence of underlying financial stress and mismatches of Treasuries and other securities in the financial system between banks, as highlighted also by the Reverse REPOs. Money-market short term overnight borrowing and REPOs through Treasuries collateral and EuroDollar borrowing has increased to $1.21 Trillion dollars.

The SOFR transactions have a constant average volume higher than $800 billion dollars, as of last week $878.0 billion dollars at 0.05% interest rate, that includes all overnight lending collateralized with Treasuries, bilateral REPO and Tri-Party REPO transactions.

The Overnight Bank Funding has been increasing to levels similar to Q1 2020, as of last week volumes were $264.0 billion dollars with progressive rates from 0.05% to 0.12%. The OBFR are a measure of the unsecured overnight borrowing in short term money-markets utilizing as reference the Federal Fund rate and Eurodollar transactions.

Domestic unsecured dollar borrowing with the EFFR stood at $70 billion dollars as of the previous week