Month-End Window Dressing Sends Fed Reverse Repo Usage To $208 Billion: Second Highest Ever

Tyler Durden's picture

We can finally close the book on the "mystery" (if there ever was one) behind the Fed's fixed-rate reverse repo operation.

Yesterday, when we noted that the total notional of the most recent 1 Day reverse repo operation was a whopping $183.3 billion, we made a modest prediction, knowing full well that today would be April 30, better known as month end, and even better known as a time when every bank has some huge, undercapitalized windows to dress.

It was, indeed, well over $200 BN. In fact, it was $208 billion, the second highest ever.

And sure enough, watch it crash to just over $100 billion tomorrow, now that a new month will have started and banks no longer need to appear quite so healthy.

So step aside any sophisticated claims that the Fed's reverse repo is a means to extract liquidity when the time to raise rates finally comes: all this latest "tool" in the Fed's arsenal is, is nothing more than a Fed-mandated and endorsed mechanism with which the banks can fool regulators and investors that they are in a far healthier condition than they really are. 

And judging by the humiliating episode involving Bank of America's made up numbers that punked the Fed into believing America's most insolvent TBTF bank was healthy enough to give be billions to investors, one of the parties most "confused" by what the RRP does, is the Fed itself.

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El Hosel's picture

How much is that rally into the window?

HobbyFarmer's picture

it's quality journalism like this that makes zerohedge THE financial site on the web.  Well worth the cost of admission.

Thanks Tyler(s)!

Babaloo's picture

Really?  This is the first you've heard of "month-end window dressing?" 

Banks partcularly, but also brokerage firms and other financial firms have been doing this forever.

And "Tyler" is making this out to be some earth shattering new news.  Everybody who knows anything is just laughing at this idiotic commentary.

Get out from under a rock and maybe you'll realize you're being played on this one...

max2205's picture's back.....

nightshiftsucks's picture

So they've been doing window dressing with reverse repo's forever ?

ZerOhead's picture

Yup... and that makes it OK.

They have been raping the Muppets forever as well.

HedgeAccordingly's picture

it's fine.. price volatility exploding as SPX gyrates uncontrolled. 

but investment banking revenues will remain robust despite the taper -

Grande Tetons's picture

December...measured from top to bottom was insane. Must have had something to do with year end? I remember the ass kicking PMs took toward the end of December.....BRUTAL. Kinda like today. 

I am grasping...I know. 

maskone909's picture

Straw buyers and fraudulent accounting practices. If a private business used these same tactics, they would be arrested for operating a PONZI.

GolfHatesMe's picture

I would love to think so, but arrested by Whom?

sodbuster's picture

There is NO mystery to what  TPTB do. EVERYTHING they do is to prop up the fiat currency and instill confidence in a fraudulent, insolvent system. Totally rigged by sociopathic criminals.

Timmay's picture

I need a Joe Six Pack version explaining what Reverse Repo is/does.

El Hosel's picture

Fuzzy math induced market rigging.

Timmay's picture

So wait, the Banks take shit assets/digital cash on their books and "Lend" it to the FED ovnt so they can classify that asset as a high quality loan? Isn't that like Money (loan) laundering??

ShorTed's picture

Not quite.  The Fed has 4trln of Treas and Agency/MBS securities on it's books.  it uses that collateral to fill in on month-end and qtr end to absorb liquidity in the money mkt.

The reason liquidity appear too great on month/qtr end is that banks who normally arb the fed with free excess reserves back out of the overnight borrowing mkt (known as EuroDollar time deposits) in order to make their "reported" balance sheet appear sound.  Tomorrow they'll lever the balance sheet back up until month-end again.

NotApplicable's picture

Well, if it were only money...

ShorTed's picture

So the gobs of cash that the mmkt funds and other cash cows normally throw at the banks needs to be absorbed through other channels...In this case the fed takes mmkt fund cash and gives the funds govvies or agencies.

FieldingMellish's picture

WTF happened to gold in the last minute of trading? Someone had a selling hardon or what?

Squid Viscous's picture

someone decided it's a barbarous relic?

Rainman's picture

Got to admit they're pretty clever ... in a perverse sort of way.

Unknown Poster's picture

I haven't seen anything about "failures to deliver" since the fed started this up.

buzzsaw99's picture

the frauderal reserve

Colonel Klink's picture

The Fraudulent Reserve, because there isn't any!

TheRideNeverEnds's picture

Say what you want about window dressing this and bubble that, GDP, Debt, funderrmentals, blah blah blah....  irrelevant.


Pull up a weekly chart of the SPX and look at the facts; back it up to 20 years.   We are going straight up at a 45 degree angle with ZERO signs of a top. none, nada, zilch not even close to forming any semblance of a top.  none. 


New highs from here are a given considering the fact that we are guaranteed to print 2000 before the year is over.   The trend-line that we have been following religiously for many years now is 2000 by the end of this year.  If you look at the channel we have been trading in for two years now the high side is 2200 at the end of the year.  So you should be buying spoos with both hands here where they are super cheap, the worst you will do is make a hundred points by DEC.    


seriously, this is not hard.  The FED has got our back, the trend is your friend, buy the dip.

Being Free's picture

Sounds great!  (Does the come with a money-back guarantee?)