The Fed's hike of repo.......>

US TSYS/OVERNIGHT REPO: The Fed's hike of repo rates is intended to scale back

its involvement in the market and allowing private actors to replace most of the

financing, while it returns to a "backstop role".

- April FOMC minutes: "With conditions in short-term funding markets having

improved substantially and with repo operations no longer needed to maintain

ample reserve levels", it might be appropriate to reposition Fed repo ops "in a

backstop role" by raising the minimum bid rate.

- Wrightson ICAP reac: "Commercial bank portfolios have a lot of flexibility to

provide more funding to the overnight repo market...the Fed's repo operations

since mid-March have helped squeeze commercial bank treasury departments out of

the market." Hiking the rates "will create more room for normal market forces to

function, which is a positive development at a conceptual level even if it will

be costly for leveraged investors in the short run."

- Though they also write, the Fed probably "winced when it saw what kind of

market environment it would be dropping this announcement into" but did anyway.