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Take a look at the amount of money that has been suspended in the Fed’s area that has begun to dwindle

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The growing demand for U.S. Federal Reserve over which investors spend overnight is expected to decline in 2022 after a record high last year, due to a decrease in low risk items that lead to better returns.

Advertisers have put a lot of pressure on 2021 in the Fed’s overnight reverse repo site where currency is converted into highly secure currencies such as the US Treasury. Daily RRP consumption was $ 1.6tn in December, reaching a record $ 1.9tn on the last day of the year. The average daily use for December 2020 was zero.

The house, which serves as a last resort, has attracted a lot of interest throughout the year due to a reduction in Treasury security bills that left investors as market capitalists. a few safe places sending their money.

But by 2022 the popularity of RRP is starting to decline, experts say, as the amount of money invested in the financial markets to end the scourge of plague continues to decline. This will bring other ways of selling money and raising the complex financial resources of the stock market that sells antiques.

“We think we are close to seeing a higher interest rate,” said Mark Cabana, chief of US rates strategy at Bank of America. “The implication of money laundering is that in the end they have other ways of attracting attention. The only reason the money is made by the Fed is because it is their worst way of doing business.”

Cuts to Treasury bill releases in 2021 – in favor of long-term loans – have been part of the reason for the RRP’s rise to prominence. In addition, the Fed’s major bond-lending program has led the central bank to increase the amount of money that goes into the economy.

Looking for cash market investment, which is among the largest buyers Treasury Funds, was so high that it caused a small amount of government debt to be borrowed from the poor.

The incentive money tied to a number of aid packages provided by Congress also increased spending on American citizens, which increased bank deposits. Banks, which in March had higher demands repaid, began counseling customers move their money into deposits in cash.

But follow the passage of the new rules that come on US government rental limits in December, the Treasury department is now expected to restructure its finances and increase its short-term security releases, providing much-needed support.

From now until the end of January, Cabana said he expects Treasury revenues to increase by about $ 600bn.

Fed in December too he announced that it will expedite the reinstatement of its procurement program, helping to reduce the discrepancy between housing costs and the total cost of purchasing.

While RRP figures are eye-catching, Fed officials have shown little interest in using the site’s history in 2021. Asked about the seemingly impossible need to stop investing in a central bank in July, chairman Jay Powell said. the place was “doing what they were supposed to do”.

Minutes of subsequent meeting meetings also provided a great deal of agreement with the Federal Open Market Committee that the site was operating as intended.

To continue operating, the Fed has repeatedly changed the way the site operates. The central bank has increased the number of eligible organizations that can access RRP and increased the amount of money they can invest in each day – a change that took place recently in September when they raised the daily limit to $ 160bn.

It started again to pay interest on a fundraiser held there on the night of June in order to support the smooth running of the small financial markets. The move came with the idea of ​​raising interest rates on more securities, which are held in the Fed by banks.

Recently, another Fed official said that the use of RRP hikes as another indication that the central bank should immediately withdraw from its monetary policy stance has been in place since the beginning of plague.

“Obviously we can go faster on the counters, because I looked at the RRP site, and there is about $ 1.5tn of the stocks that are donated to us every day from financial institutions,” said Christopher Waller, the ambassador. in mid-December like him he spread a charge that the Fed should start reducing its costs by summer. “We put a lot of money into the system so the market doesn’t really need it.”

Profitability for billing increases is expected to rise sharply in the $ 4tn wallet market over a difficult year. Bad stocks in the market in 2021 removed profits and forced money to block new advertisers.

The financial market crisis, however, could return at the end of the year, some experts warn. While the Treasury Government is expected to sell more bills in the near future, loans issued in 2022 are expected to decline due to the slowdown in fiscal programs.

“When the bill goes up a lot, this draws money from the RRP. But the real size of the Fed’s balance sheet and the amount of stocks I think make sure we see big numbers every day for the next few years,” said Ben Jeffery, pricing expert at BMO Capital Markets. .

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