Fêd Dráined $4 Billion from Liquidy last week

[bimetalaupt]

Fed Begins Draining Reserves With Reverse Repos Agreements Aug 17,2011

We should be very careful with this .. Bi


The Federal Reserve said it’s conducting tri-party reverse repurchase agreements as policy makers prepare for the eventual withdrawal of monetary stimulus.

The one-day transactions, part of a series of open-market operations that began in 2009, don’t represent any change in monetary policy, according to a statement posted Aug. 12 on the Federal Reserve Bank of New York’s website. Treasuries, agencies and agency mortgage-backed securities will be eligible collateral today.

Fed began expanding its counterparties to increase the capacity for the eventual draining of reserves as primary dealers shore up their own balance sheets after the worst financial crisis in decades.

In a reverse repo, the Fed lends securities for a set period, temporarily draining cash from the banking system. At maturity, the securities are returned to the Fed, and the cash to its counterparties. The central bank added more than $1 trillion in extra cash to its balance sheet as part of its effort to combat the financial crisis.

In a tri-party arrangement, a third party functions as the agent for the transaction and holds the security as collateral. JPMorgan Chase & Co. and Bank of New York Mellon Corp. are the only banks that serve in a trade-clearing capacity in the tri- party repo market.

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[bimetalaupt]

Federal Reserve drained liquidity last week.. See it in the SOMA report...
Holding down 4 billion, Just a thought,
BiMetal Au Pt
System Open Market Account Holdings


The System Open Market Account (SOMA), managed by the Federal Reserve Bank of New York, contains dollar-denominated assets acquired via open market operations. These securities serve three purposes:

Collateral for U.S. currency in circulation and other reserve factors that show up as liabilities on the Federal Reserve System's balance sheet
A tool for the Fed’s management of reserve balances
A store of liquidity in the event an emergency need for liquidity arises


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Securities Holdings as of August 31, 2011
($ thousands)


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Summary
T-Bills
T-Notes & T-Bonds
TIPS
Agencies

Security Type Total Par Value
US Treasury Bills (T -Bills) 18,422,636.7
US Treasury Notes and Bonds (Notes/Bonds) 1,557,455,352.6
Treasury Inflation-Protected Securities (TIPS)1 66,754,044.3
Federal Agency Securities2 109,776,000.0
Mortgage-Backed Securities3 (Settled Holdings) 884,945,035.7
Total SOMA Holdings 2,637,353,069.3
Change From Prior Week -3,815,713.7
1Does not reflect inflation compensation of 9,481,327.5
2 Fannie Mae, Freddie Mac and Federal Home Loan Bank
3Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is the remaining principal balance of the underlying mortgages.

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