Repo and Reverse Repo Operations

[kmiklas]

Can we discuss this Fed report? Am I reading this correctly?

As I read it, in the last two days, since Monday, they've pumped $739 Billion into the repo market and ultimately (hopefullyl) into the markets. These dollars are used to buy Treasury issues, and resold to investors. The cash on hand is then being used to prop up the DOW.

112.932
  2.504
93.000
123.625
  0.051
132.375
  1.325
82.600
87.100
103.100
----------
739.

https://apps.newyorkfed.org/markets...=TRUE&startDate=01/01/2000&enddate=01/01/2000

 

[Same Lazy Element]

Repo dealers have been reluctant to lend. Institutions that have bonds on their balance sheet and need cash come to the dealers but can't get a loan at a reasonable rate despite having good collateral.

In order to help the market and lower the repo rates the Fed engages in the reverse repo (i.e. lends market participants money against their UST collateral). It's a very targeted liquidity operation that ensures that institutions have access to short-term funding.

How do you come to the conclusion that this money will eventually be used for supporting the Dow? There are many places money goes and most of it is not stock market.