Many wondered what the driver of the late-day panic-buying across the US equity market was today.
The answer is simple - The Fed... again.
In a statement issued at 1515ET, The New York Fed confirmed it would dramatically increase both its overnight and term liquidity provisions beginning tomorrow through November 14th.
The Desk has released an update to the schedule of repurchase agreement (repo) operations for the current monthly period. Consistent with the most recent FOMC directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation...
That is a massive 60% increase in the overnight repo liquidity availability (from $75 billion to $120 billion) and a 28% surge in the term repo provision (from $35 billion to $45 billion).
As a reminder, overnight liquidity demands have remained high since initiated...
The decision to increase the liquidity provision could be based on the soaring demand for POMO...
“It’s just more evidence the Fed will not back off as yearend gets closer,” said Mike Schumacher of Wells Fargo Securities’ global head of rate strategy.
“The Fed wants to take out more insurance. You had repo pick up last week. That might not have gone over too well.”
Additionally, while there are no details, this time period crosses both month-end (and the normal liquidity issues associated with that) and the UK's Brexit deadline - which could still very well mean dramatic dislocations and 'clogs' in the pipelines of critical liquidity around the world.
$120 billion of liquidity per day?! What is The Fed not telling us?