Demand for Fed’s Repo Loans Surges Past $100 Billion a Day as 10-Year Treasury Hits Lowest Rate in 149 Years

By Pam Martens and Russ Martens of Wall Street on Parade.

Federal Reserve Chairman Jerome Powell certainly has an odd notion of what constitutes an “orderly” market. At his press conference on Tuesday, following the announcement that the Fed was cutting its Fed Funds rate by a half point without waiting for its regularly scheduled meeting when rate cuts are normally deliberated, Powell said that “financial markets are functioning in an orderly manner and all that sort of thing.”

Challenging Powell’s assessment of “orderly,” the Dow dropped 603 points in the span of less than 30 minutes while he was speaking at his press conference and trying his best to bolster confidence in the market. That didn’t seem very orderly.

On top of that, at 8:45 a.m. that very morning, the New York Fed had pumped $100 billion in 1-day repo loans into the trading houses on Wall Street, $8.6 billion short of what the trading houses had sought to borrow. Even at the peak of the repo loan crisis that began on September 17, 2019 and through the end of January 2020, the Fed had never pumped out $100 billion in 1-day repo loans on a single day. Yesterday, the Fed pumped out another $100 billion in 1-day repo loans against demand for $111 billion – further evidence that Wall Street firms are in need of liquidity.

This is the first time since the financial crisis of 2008 that the Fed has been making repo loans to Wall Street. The Fed is also purchasing $60 billion a month in U.S. Treasury bills, which many folks on Wall Street consider the fourth round of quantitative easing (QE). The Fed deployed QE1, QE2, and QE3 following the 2008 financial collapse on Wall Street to further ease interest rates on top of cutting its Fed Funds rate to the zero-bound.

As for orderly functioning in the stock market, the Dow Jones Industrial Average has closed with multiple 1,000-point drops and spikes higher in the past week and a half. That’s certainly not orderly functioning… 

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