Oversubscribed Fed Repo Operation Shows Thirst for Year-End Cash

(Bloomberg) — Money-market participants wary of year-end funding pressures are taking advantage of cash being offered by the Federal Reserve to carry them through the rest of 2019, with the central bank’s term repurchase-agreement operation oversubscribed once again on Monday.

The Federal Reserve Bank of New York’s 42-day term repo operation attracted $42.55 billion in bids, more than the $25 billion on offer. This action, with a maturity of Jan. 13, 2020, was the second of three operations to provide funding past the year-end period.

The maximum size of the Dec. 2 term operation was increased last week to $25 billion from its initial amount of at least $15 billion after the central bank’s first year-end offering was oversubscribed. Market participants had submitted $49.05 billion in bids for the 42-day term action on Nov. 25, which was more than the $25 billion available.

The third action to provide year-end funding is scheduled to take place on Dec. 9, when the Fed will offer at least $15 billion of 28-day cash.

The Fed’s overnight repo operation, as has been the case with most such actions recently, was undersubscribed on Monday. It attracted $72.9 billion of bids, less than the maximum offering size of $120 billion.

(Updates throughout, adds details of overnight operation and analyst comment.)

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