Céline Choulet, analyst at BNP Paribas, points out that in the last three months, the US Federal Reserve has injected more than USD 360 billion of central bank money through repurchase agreement operations (repo) and outright purchases of T-bills.
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“It will ramp up its intervention further between now and 31 December, to remove the risk of losing control of short-term rates again because of the specific needs of market participants as they approach their financial yearend.”
“By the year-end, if the volume of demand for repo transactions reaches the total amount offered by the Fed, USD 650 bn of central bank money will have been injected.”
“However, even that huge amount of support could prove insufficient. That is due in particular to the planned increase in the Treasury’s account with the Fed, the leverage constraints of broker-dealers and the G-SIB capital surcharge.”
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