🔹American banks are drowning in dollars. As the Federal Reserve pumps $ 120 billion into the markets every month, buying back government and mortgage bonds, banks have a surplus of liquidity, which they cannot find any better use than to turn it back to the Fed at 0% per annum. The volume of reverse repo transactions, in which banks and money market funds “park” free “cash” in the Fed, continues to break historical records.
🔹 Even in mid-March, the demand for such deals was zero. By the end of April, he reached the level of $ 200 billion, on May 20, it exceeded $ 300 billion, and at the end of the month it exceeded $ 400 billion.
🔹A week ago, the total amount of free funds of banks placed in the Federal Reserve was $ 584 billion, but now this figure has reached $ 747 billion. There is still nowhere to do with the money! And although quite hawkish comments were received following the results of the last FED meeting, apparently the market does not believe so much in the imminent collapse of QE.
🔹In the foreign exchange market, this, in theory, should provoke a sharp weakening of the dollar, which we have not yet seen. There is a delayed effect and most likely this time lag will last until the end of summer.