Illya Gerasymchuk
Financial & Software Engineer
in practice, FED's SRF is used when there is a scarcity of liquidity/cash
in practice, FED's SRF is used when there is a scarcity of liquidity/cash
the market has US bonds & needs cash, so lenders increase rates
SRF sets a daily rate. if that rate is smaller than in the smaller repo market - the dealers instead borrow USD directly from the FED
with SRF the FED sets an upper limit on repo market rates
most of the collateral is US Treasury bonds
this exerts downward pressure on bond yields - by preventing sell-offs