Fed overnight repo spiked back in October (putting liquidity into banks).
Reverse repo (draining liquidity) surged during the Fed’s inflation fight. Then it drains as the Fed eased policy. This was “adding” liquidity by reduced in the liquidity drained. As it gets to zero recently, overnight repo spikes, as if the trend kept continuing.
Prior spike came in September 2019 when the Fed started stealth QE to keep markets liquid. Current largest spike came on October 31. SPX and QQQ have a potential top in place, which was made on October 29. There are no coincidences.
For those who forgot, here’s how SPX performs once this process gets going:
How about the 2s10s? Glad you asked. Steepened out of inversion, consolidated for about 250 days and then was off to the races starting in November 2019.
