Watching U.S. Repo, Liquidity, and the Fed

As I detailed at length in my last post, U.S. Repo, the Fed, Coronavirus, and Global Demand/Supply Shocks, overnight repo submissions have continued to increase to $123.625 billion on 3/10 and $132,375 billion on 3/11.  As a result the Fed on 3/11/2020 has increased the overnight repo daily funding cap to $175 billion through April 13 to provide the liquidity to ease pressures on funding markets and adequate reserves in the banking system.  Besides offering 14 day repo on Tuesday and Thursday of each week capped at $45 billion each offering,  the Fed will also offer three one month offerings capped at $50 billion each starting Thursday 3/12.

With the continued daily increases in repo submissions and the evolving risks in the global economy, this increase in repo operations was to be expected and shows the commitment of the Fed.

Meanwhile, Italy has shuttered all shops except suppermarkets, food stores, and pharmacies in its nationwide lockdown, India has suspended all tourist visas, and, in a Presidential Oval Office meesage to the nation, President Trump announced he would seek to provide aid to affected workers and small businesses, deferred taxes for certain affected individuals and businesses, restrict travel form Europe for thirty days while not offering any additional stimulus and support for health care during this coronavirus pandemic.  The Oval Office message has not been well received as Asian and European markets have significantly tanked and the U. S. Dow futures show tthe Dow is set to fall 1195 points on opening as I write this.

With reduced global travel, businesses telling workers to work at home, universities sending students home, states, cities, and athletic leagues (NBA suspended its season) limiting public gatherings in the United States (which was 4-6 weeks too slow in preparing and responding to the coronavirus infection), the U.S. and global economy is shutting down.  Consequently, as I detailed in my last post, the recessionary pressures on the U.S. economy is obviously increasing.

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