The Federal Reserve publishes daily updates to their Reverse Repo Operations, and their all-time chart is absolutely staggering. They topped $1 trillion per day in 2021 for the first time ever, and are now well above $2 trillion per day, showing no signs of slowing down.
The description of the metric says: "The New York Fed conducts repo and reverse repo operations each day as a means to help keep the federal funds rate in the target range set by the Federal Open Market Committee (FOMC)."
- Is this an early indicator that the Federal Reserve is struggling to keep interest rates in their target range?
- How much larger could this repo/reverse repo market grow before something breaks?
- What might be the first thing to break and what will the consequences be?
This is a notoriously opaque topic, so drop any/all additional context on how repo markets work in the comments below!