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Fed directly offering new US government USD obligations

Summary:
Seems to be some confusion out there so here you can see in this Government Money Market Mutual fund prospectus that the Fed has created a new govt obligation for USD savers to save in… They have b (fund’s largest holding) in a RRP with the FRBNY at the 3.05% RRP rate: This is going to go up towards 4% in two weeks then towards 5% in December… 🤑🧟‍♂️🤑🧟‍♂️This RRP asset has been created as an alternative to a depository account at a system Depository Institution for USD savers because those institutions don’t have a high enough value of regulatory assets to allow these USD balances to be on deposit there…  due to the regulatory asset value reduction effects of the Fed’s own policy rate increases themselves…Rube Goldberg arrangements but it’s still understandable…

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Seems to be some confusion out there so here you can see in this Government Money Market Mutual fund prospectus that the Fed has created a new govt obligation for USD savers to save in… 


They have $20b (fund’s largest holding) in a RRP with the FRBNY at the 3.05% RRP rate: 


Fed directly offering new US government USD obligations


This is going to go up towards 4% in two weeks then towards 5% in December… 🤑🧟‍♂️🤑🧟‍♂️

This RRP asset has been created as an alternative to a depository account at a system Depository Institution for USD savers because those institutions don’t have a high enough value of regulatory assets to allow these USD balances to be on deposit there…  due to the regulatory asset value reduction effects of the Fed’s own policy rate increases themselves…

Rube Goldberg arrangements but it’s still understandable…


Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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