The NY Fed just increased their overnight repos to $120 billion, which is 60% more than what it was capped at $75 billion
Apparently the Fed needed to do this in the middle of the day, outside their scheduled meetings, and not even during the overnight lending window.
Something big just happened behind closed doors
All the junk that banks are holding that they want the Fed to buy from them, the Fed isn’t buying (yet). The new QE4 bi-weekly operations are for Treasury Bills, not bonds. But the big players like JP Morgan don’t have a lot of t-bills, they have a bunch of notes and bonds, probably much of it overseas and negative yielding radioactive trash, that they can’t pawn off (YET).
The big banks are trying to strong-arm the Fed into opening up into full-on QE like post-GFC, by not lending to the overnight market and leaving the smaller banks scrambling for cash to meet fractional reserve quotas. It’s either that or end up literally insolvent by the time the stock market opens.
This is ready to blow, probably within the next 6-12 months with how yield curve inverted, most western nations having implemented negative rates and with this repo madness.