The Fed conducted a huge $9 billion net draining operation on a day when the market was faced with settling $29 billion in Treasury CMBs. The Fed added $6.75 billion in weekend repos against $15.75 billion in expirations. The 5 day net stayed negative. The action breaks the strong uptrend in the SOMA over the past month. It seems that they are setting up for a possible tightening, as they allowed Fed Funds to trade at 5.31 overnight, and with the drain, pushed the rates at today’s repo auction to the 5.31-35 range. Steve Northwood and Russ Winter alluded to the possibility in yesterday’s podcast. Making matters worse, the Treasury announced another $11 billion in CMBs on top of $29 billion in new paper settling today. Stocks prices felt the pressure. Click here to download complete report in pdf format (Professional Edition Subscribers).
Try the Professional Edition risk free for thirty days. Unbundled subscription service packages starting from as low as $39! Click here for more information.
