Liquidity Returns

Alea doesn’t like it, but I actually find this reassuring:

The Federal Reserve is draining U.S. banking reserves temporarily via overnight reverse repurchase agreements, the Federal Reserve of New York said on Wednesday…

Such a move typically puts upward pressure on overnight borrowing costs between banks, but analysts said the Fed decided it needed to offset the flood of cash expected from different liquidity facilities it had announced in recent days to ease the credit crunch.

Yep, the NY Fed is now worried about a "flood of cash". In the present environment, that’s the kind of worry you want to have.

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