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Discussion in 'Economy' started by Sierra Mike, Oct 1, 2014.

  1. Sierra Mike

    Sierra Mike The Dude Abides Staff Member

    Embarrassing? Well, at least no one was recording conversations.

    Read all about it at In Significant Test, Fed Facility Fails to Defend Short-Term Rate Floor. (From WSJ, will likely not be free for much longer.)
  2. ethics

    ethics Pomp-Dumpster Staff Member

    Read about it? Two days ago our repo guys asked us to add the handling of negative rate trading to our program. The head developer actually came to the trading floor and he was floored. His exact words, "so wait, how is this working now?"

    Repo trader: "See these negs here? They are PAYING companies to hold money for them.

    Thanks Obama, great job on the economy you fucktard.
  3. SixofNine

    SixofNine Jedi Sage Staff Member

    I'm dizzy. That sounds like how they do repos on the planet Bizarro.
    ethics likes this.
  4. Sierra Mike

    Sierra Mike The Dude Abides Staff Member

    No, that's not it...under normal repo rules, the Fed would pay out a chunk of interest for holding money. Under the negative rate, the Fed gets to hold the money, but doesn't pay out anything, essentially creating a "why would we bother?" market for financial institutions. It never should have happened, and it's embarrassing as hell. (Though not as embarrassing [or outrageous] if the Fed started charging money for repos.)

    This was actually touched on back in 2012, but of course, I never paid attention to it... The Upside-Down World of Negative Interest Rates - Businessweek
  5. Allene

    Allene Registered User

    Thanks for the link, SM; it helps me to better understand this situation.

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