"QE Via The Back Door": JPM Asks If The Fed Will Restrict Reverse Repo Use To Short Circuit $1.5 Trillion Bank Run

One week ago, we discussed a recent report from Barclays' repo guru Joseph Abate, who predicted that no matter the amount of emergency mitigation measures implemented by the Fed, the second, slower-burning phase of the bank run had begun as "depositors had finally awoken" about the opportunity cost of keeping their deposits at potentially challenged banks while earnings far less than they can earn by keeping their money in effectively risk free securities such as T-bills or parking deposits at Money Market funds.

Abate's conclusion was that as long as the Fed kept Fed Funds rates high, i.e., 5% or so where they are now, the rotation out of deposits and into money markets would continue so long as the rate gap between deposits and money market rates is 200bps or higher, which is where it is now.