repo rates increase and borrowing decreases in quarter-ends

repo rates increase and borrowing decreases in quarter-ends

this includes the upcoming month of September. in addition, September 15th the corporate tax limit in the US

this reduces global liquidity, so asset prices tend to fall

this is one of the reasons why September is historically a bad month for Bitcoin

moreover, currently the US Treasury is issuing debt and cash at ON RRP is running low. MMF, dealers and banks purchase those T-bills. if they do not have cash in ON RRP, it will be financed by outflows from bank reserve accounts into TGA

the funding could also come from Fed’s facilities, like the SRF or OMO

however, current SRF rate is 4.5%, which is above the yield on T-bills, and Fed is still officially in QT, so no large-scale, longer-term liquidity injections via open market operations

Standing Repo Facility (SRF) is a policy rate set by the Fed, according to the target rate. so unless the target rate is decreased, SRF rate is unlikely to be reduced

this situation is putting pressure on the Fed to decrease interest rates and start QE soon

TGA fluctuations must be offset by another asset or liability from Fed's balance sheet

⬆️ TGA increase = liability down or asset up
⬇️ TGA decrease = liability up or asset down

found this balance sheet model in Fed's notes, and it's a good visual aid to this thread