The chart is about 'repo operations.' I don't think I trust this website to properly explain what those are or what it means.

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f33d5173 3 hours ago | parent | next [-]

They say

> To get the cash, banks hand over Treasury notes and bonds, mortgages, and other securities, known as a “repo.” Then they get to borrow cash at face value.

Does that meet your standards?

	▲	jeffbee 3 hours ago \| parent [-]
		It is a partial definition. To use the repo facility, borrowers don't just stake their assets, they also promise to re-buy them hours later at a higher price. It is literally overnight money issued in exchange for high-quality assets. If somehow the borrower goes broke within a few minutes, the Fed is still holding their assets. Edit: I forgot about the haircut. The repo only lends out 98% of the staked assets value.

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jeffbee 3 hours ago | parent | prev [-]

Imagine zooming out the chart to a relevant timeframe.

Bottom of https://www.newyorkfed.org/markets/desk-operations/repo ... click "all"

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jtbayly 3 hours ago | parent [-]

Now I'm curious. I don't understand what repo is, but why did it not happen at all for 5 years?

	▲	jeffbee 3 hours ago \| parent [-]
		When the interest rate was zero they could borrow infinite overnight funds for nothing. When the interest rate is 3.75% it stops being a free facility. Also, post COVID, the Fed was flooding the economy with cash and market participants actually had the opposite problem: they were coming to the reverse repo facility (https://www.newyorkfed.org/markets/desk-operations/reverse-r...). That flood has subsided, so repo activity is returning to pre-COVID norms. Despite the tone of the OP, the people who exchange securities for cash at the repo facility are paying not just the fed rate, but a higher punitive rate. It is expensive, by design, so banks seek liquidity deals privately if they can. It is not, in any sense, bags of money from helicopters.