Fed intervenes against threat of negative rates

This is normally an extremely rare phenomenon, but it tends to repeat itself. In recent weeks, on several occasions, the yield of certain T-Bills, short-term notes issued by the Treasury, has fallen below 0%. Very strong pressure is currently reigning on the US short-term rate market, where liquidity has never been so abundant. The situation prompted the Federal Reserve to react on Wednesday, by raising two technical rates: that of the remuneration of excess reserves placed by banks, and that of the “reverse repo”.

The market is facing a particularly complex situation. On the one hand, exceptional liquidity. “Via its purchasing programs, the Fed injects $ 120 billion each month. And stimulus plans, particularly checks granted to households, have increased bank reserves, ”explains Stéphane Déo, head of market strategy at Ostrum AM. This made the outstanding money market funds (MMF), the American money market funds, jump to more than 4,000 billion dollars, a historic record

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