More Liquidity Extraction: Fed Resumes Reverse Repos

Tyler Durden's picture


Dumping yet another liquidity cold shower in the aftermath of today's less than dovish Humphrey Hawkins speech by Bernanke (and sending precious metals even lower, albeit briefly), is the Fed's resumption of even more purely optical liquidity extractions, however symbolic, in the form of reverse repos, after the NY Fed just completed the first such operation since the dark days of summer 2011. As a reminder, the last time the Fed did these was back in August 2011 which cemented the market's plunge as it gave the market the impression that at least superficially no more money was coming in (intuitively it makes no sense to have Reverse Repos running at the same time as incremental liquidity), even as the reliquification baton was quietly being passed to the ECB. Today, reverse repos resume, as the Fed pays Primary Dealers an annualized rate of 0.17% in exchange for lending out $100 million in Treasurys. Will this continue? It depends entirely on what the economy, pardon, the Russell 2000 does. After all, that is the third and only mandate of the Fed that matter. And if the market considers this an indicator that QE3 really is delayed indefinitely, the FRBNY will mostly likely be forced to reassess.

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Wed, 02/29/2012 - 14:49 | 2209025 trav7777
trav7777's picture

beep beep beep...shit in reverse, bitchez

Wed, 02/29/2012 - 14:52 | 2209039 Ahmeexnal
Ahmeexnal's picture

yeah Bob, everyone knows you like yours pushed in!
btw...check your mail!


Wed, 02/29/2012 - 15:02 | 2209094 trav7777
trav7777's picture

who the fuck is bob?

Wed, 02/29/2012 - 15:18 | 2209133 Stax Edwards
Stax Edwards's picture

Beep_Beep_This is a test of the FED liquidity removal operations.  This is only a test. Had this been a actual liquidity removal operation, you would see the equity markets crashing.  We now return to your regularly scheduled programming.

Wed, 02/29/2012 - 15:28 | 2209174 levelworm
levelworm's picture

What is FED thinking? I agree that this is merely a test, yet a strong suggestion.

Wed, 02/29/2012 - 15:03 | 2209096 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

how crazy is this goin to be when economic data improves and markets go down LOL

Wed, 02/29/2012 - 14:49 | 2209027 RobotTrader
RobotTrader's picture

Here we go again.



"Fear" gripping financial markets.


GLD goes down 4x faster than SPY



Wed, 02/29/2012 - 15:08 | 2209110 mayhem_korner
mayhem_korner's picture



Yes, Robo - CBs pull back on liquidity when markets are gripped with fear.

Premise = FAIL

Wed, 02/29/2012 - 15:24 | 2209164 SheepDog-One
SheepDog-One's picture

Equity markets are like Robo, the kid in the sandbox with the hockey helmet on.....takes em 24 to 48 hours to figure out whats going on.

Wed, 02/29/2012 - 15:45 | 2209276 donsluck
donsluck's picture

Another buy opportunity for PMs. Had to happen, silver up 30% in two months.

Wed, 02/29/2012 - 14:50 | 2209031 Cognitive Dissonance
Cognitive Dissonance's picture

Maybe they WANT the market to correct?

Wed, 02/29/2012 - 14:51 | 2209038 RacerX
RacerX's picture

agreed. Just wondering which "they" they are.

Wed, 02/29/2012 - 14:54 | 2209046 gjp
gjp's picture

If it's PM markets, then they've got their wish.  If it's US stock markets, it seems nothing short of pulling the plug on the Internet will accomplish that.  Otherwise, it's AAPL up 2% per day as far as the eye can see.

Hard to fathom how commodities get killed like that while equities remain untouched.

Wed, 02/29/2012 - 14:58 | 2209072 vote_libertaria...
vote_libertarian_party's picture

I was just thinking about that.  Who would BB and Geitner rather work with?  My guess is Obama.


If you crash stocks now they will be on the upswing in November (possibly).


If you keep filling the balloon it may pop in the fall at the wrong time for Obama to get re-elected.

Wed, 02/29/2012 - 14:50 | 2209032 tmosley
tmosley's picture

Official withdrawl, unofficial flooding.

Should be fun.

Wed, 02/29/2012 - 14:55 | 2209051 Cognitive Dissonance
Cognitive Dissonance's picture

Sounds like they want some people to do one thing and others to do the opposite. But I thought the Fed was on "our" side?

Damn. Foiled again. :)

Wed, 02/29/2012 - 14:55 | 2209055 JPM Hater001
JPM Hater001's picture

Yes, pay no attention to the other hand...look at this shiny object that makes you laugh (I learned that from the Teller piece thank you ZH)

Wed, 02/29/2012 - 14:52 | 2209041 PontifexMaximus
PontifexMaximus's picture

Exactly, you got the point: the baton was handed over to collegue Draghi, and his doing his job in a perfect manner. When comes BB's turn?

Wed, 02/29/2012 - 14:55 | 2209052 DB Cooper
DB Cooper's picture

Could he (Bernacke) be trying to help Europe weaken the EURO which should eventually help Europe help us by not imploding.

Wed, 02/29/2012 - 14:58 | 2209066 PontifexMaximus
PontifexMaximus's picture

Who has more ammunition to expand the bal. sheet?

Wed, 02/29/2012 - 15:02 | 2209089 DB Cooper
DB Cooper's picture

Bernacke does but must feel he doesn't need to right now.  Bigger problem is Europe and he doesn't help Europe by driving the EURO to 1.50

Wed, 02/29/2012 - 14:56 | 2209057 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

At least Bernanke keeps things exciting.

Wed, 02/29/2012 - 14:58 | 2209063 JPM Hater001
JPM Hater001's picture

The market looks like a DUI arrest and 13000 is the line it's suppose to walk.

Again- Does anyone else think the market looks drunk?

Wed, 02/29/2012 - 15:01 | 2209085 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Parron me, Misser Ossifer....sir, why am I breeing pulled over agin?

Wed, 02/29/2012 - 15:22 | 2209150 VulpisVulpis
VulpisVulpis's picture

What seems to be the officer, problem?

Wed, 02/29/2012 - 15:34 | 2209204 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


Wed, 02/29/2012 - 15:24 | 2209160 MachoMan
MachoMan's picture

HE HAS TO...  from the onset, ambiguity is the only way the magic trick works...  as soon as it is so apparent that even a caveman cannot reasonably dispute the dollar devaluation, then the whole thing collapses as panic ensues...  maybe we get there with $5 gas...  maybe it takes a few oil producing nations to decide to switch the medium they accept in exchange for their oil...  maybe it takes a military loss by the united states...  who knows...

but, in the meantime, there will be ambiguity.

[ps, the money changers make the most from volatility].

Wed, 02/29/2012 - 14:58 | 2209067 Boilermaker
Boilermaker's picture

Well, golly, if you can leverage 100 : 1 and buy futures, so what?

The heavy hand of the Fed is, as usual, right in there today propping up this piece of shit.  So, really, who gives a shit about some tiny reverse repo operations?  The script is written. 

Wed, 02/29/2012 - 15:00 | 2209083 PontifexMaximus
PontifexMaximus's picture

Unfortunately sometimes it has to be corrected because rookies make their jokes in the PM markets.....

Wed, 02/29/2012 - 14:58 | 2209069 MFL8240
MFL8240's picture

This is a fuckin disgrace these bastards are playing games with our lives and money and this has got to end. END THE FED NOW!

Wed, 02/29/2012 - 15:08 | 2209109 Boilermaker
Boilermaker's picture

You obviously don't know the rules of the game.  This is past the point of no return.  Oh, by the way, you lose the game in the end.

Wed, 02/29/2012 - 14:59 | 2209074 Jason T
Jason T's picture

just got email from Harry Dent's service:



As you probably know, gas prices are soaring, European 'austerity measures' are expected to fail, our own debt situation is a clown car, it's an election year, and Israel will soon attack Iran."


Calls our debt situation a "clown car" which got me laughing.  Banzai??

Wed, 02/29/2012 - 14:59 | 2209079 Paul Thomason
Paul Thomason's picture

The market top is all because of the Jupiter! - check this article out 'The Jupiter Cycle Effect On Wall Street'

Wed, 02/29/2012 - 15:02 | 2209080 SDRII
SDRII's picture

setup for the oil takedown into the summer driving season and the election ramp. Jesse on gold.



The downdraft in gas will be sold as a stimulus for consumers.


Carrot and stocks


Wed, 02/29/2012 - 15:03 | 2209097 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I welcome another exciting year for Zero Hedge and a boring year for everyone entertained by TV and iPhones.  While we watch the Fiat Ponzi destroy itself and buy PMs at the best levels, everyone else drones on about Kimmy K's dress size and Bob the Bacholer's pregnant girlfriends.

Keep this shit going, Bernankenstein!  At least so I can keep stacking at these ridiculously low prices.

Wed, 02/29/2012 - 15:11 | 2209115 SheepDog-One
SheepDog-One's picture

Never going to happen. Everyones got it all figured out 'theyre taking down oil, to placate the bankrupt american, for happy-time election'...bunch of bullshit 100%

Wed, 02/29/2012 - 15:30 | 2209189 kito
kito's picture

damn sheepie, not only has ben told them qe3 is a wet dream, hes pulling his money OUT of the market!!! shit man, pouring salt on the wound!!!!

Wed, 02/29/2012 - 15:34 | 2209205 SheepDog-One
SheepDog-One's picture

Yep! Meanwhile stock are still busy playing with cat turds in the sandbox.

Wed, 02/29/2012 - 15:03 | 2209092 Boilermaker
Boilermaker's picture

All averages now GREEN.

Well, again and again, I tell myself I'll never be surprised by the manipulation.  But, somehow, it just blows my mind yet again.

How shameless can this get?

Wed, 02/29/2012 - 15:06 | 2209103 mayhem_korner
mayhem_korner's picture

How shameless can this get?


Do you really want to find out?  'Cuz yer gonna!

Wed, 02/29/2012 - 15:06 | 2209104 SheepDog-One
SheepDog-One's picture

Relentless placating of the 401K Bathrobe Brigades....cant have THEM selling before the FED rips everything they own one morning.

Wed, 02/29/2012 - 15:10 | 2209111 Boilermaker
Boilermaker's picture

Well, yea, but not even a hint of camo?  Just fuckin' out in public now?  My god, this is pathetic as hell now. 

I'll go out on limb....major unexpected and unexplainable ramp up into the close to solidify "13,000"

Wed, 02/29/2012 - 15:10 | 2209102 mayhem_korner
mayhem_korner's picture



Ben needs to reset to "pre-flood" levels so that a "rescue" can be orchestrated just ahead of November 6th.

Wed, 02/29/2012 - 15:32 | 2209195 SheepDog-One
SheepDog-One's picture

Ok, well....let er RIP then Ben! What are you waiting on?

Wed, 02/29/2012 - 15:20 | 2209142 Sutton
Sutton's picture

Reverse Repos(April 2010-August 2011)=DOOM

Wed, 02/29/2012 - 15:23 | 2209151 kito
kito's picture

where are all the whining bitches screaming "qe is always happening!!...ben is printing!!...ben is printing" ?how does one print when hes sucking liquidity out of the market. gold down 75 bitches...ben is NOT PRINTING

Wed, 02/29/2012 - 15:32 | 2209184 SheepDog-One
SheepDog-One's picture

LOL...and stocks like RoboTarder the kid playing with cat turds in the sandbox will require a couple days before they realize whats really going on. No QE, putas.

Wed, 02/29/2012 - 15:41 | 2209250 Ullage_Report
Ullage_Report's picture

Whip Inflation Now !

Wed, 02/29/2012 - 16:29 | 2209489 Ned Zeppelin
Ned Zeppelin's picture

Window dressing, pure and simple.  Not even as sensible as starting up an old tractor up at the country place one every six months to make sure it can still start. In case you need it.

If they ever need reverse repos to mop up liquidity, it will quite a show that precipitates its use.

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