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There's an explanation here: https://wolfstreet.com/2019/11/06/whats-behind-the-feds-bailout-of-the-repo-market/ https://wolfstreet.com/2019/11/06/whats-behind-
by henryw 7y ago
There's an explanation here: https://wolfstreet.com/2019/11/06/whats-behind-the-feds-bailout-of-the-repo-market/ https://wolfstreet.com/2019/11/06/whats-behind-the-feds-bail... & https://www.youtube.com/watch?v=ORGFtWowKKM https://www.youtube.com/watch?v=ORGFtWowKKM
Basically there are actors borrowing at the low repo rates and using it on higher rate government backed mortgage products. Banks with money don't want to lend to these actors, hence the repo rate hike.
- ChainOfFools 7y agois this to support specifically the emerging non-QM product ($20-ish BN so far in 2019) sector?
- tryitnow 7y agoWow. This is an interesting take. I didn't know higher risk firms like hedge funds, PE firms, and REITs are borrowing so heavily in the repo market. So basically, this is the Fed just handing out cheap money to these firms. It's socialism for the super-rich.
- nostrademons 7y agoI'd bet more on the European carry trade, with various financial firms attempt to arbitrage the difference between negative interest rates in Europe and positive rates in the U.S. That creates a natural demand for short-term dollar loans: https://news.ycombinator.com/item?id=21478251 https://news.ycombinator.com/item?id=21478251