The usage of Federal Reserve bank rescue tools has reached a new high!

Due to the increased issuance of short-term bonds by the Ministry of Finance, which provides short-term investors with another option, the demand for this tool has been weakening this year. Compared to last year12month30Daily record breaking2.554Compared to trillions of dollars, the balance of reverse repurchase tools has significantly decreased, and some people are starting to worry about the consequences.

　　Wrightson ICAPeconomistLou CrandallIn a memo on Monday, it was stated that the Federal Reserve should stop reducing its bond holdings until the tool is depleted to ensure that banks do not excessively tighten their cash reserves and increase pressure on the short-term financing market.

"We believe that banks should be encouraged to hold a large amount of liquidity buffer, so we tend to have a broader definition of 'sufficient'."CrandallWrite. "In the context of a surge in financing demand, the remaining cash in reverse repurchase instruments can be reallocated from money market funds to the repurchase market."

The scarcity of bank reserves has led to an increase in overnight lending rates, especially in2019In, when the Treasury Department increased borrowing, the Federal Reserve stopped buying as many treasury bond bonds as possible for its balance sheet.

Last week, the Federal Reserve's balance sheet shrank significantly457Billion US dollars, to7.815Trillion dollars, for2021year5The lowest level since the beginning of the month. Currently, the balance sheet of the United States has dropped by more than1.1Trillion dollars, but in this context, there is still a long way to go. The Federal Reserve's quantitative tightening plan is accelerating again, and its holdings of securities have decreased303USD100mn