Moments ago we got confirmation when the Fed reported that one day after it expanded its repo operations, there was a record demand for Fed liquidity in both the term and repo operations.

With the term repo expanded from $20BN to $45BN and the overnight repo ceiling also raised from $100 to $150BN, moments ago the Fed announced that it had received the most liquidity demand on record, as Dealers indicated some $93BN in term repo submissions (which thanks to the expanded facility size meant that the oversubscription dropped from a record 3.6x to 2.1x)

As we pointed out last week, this continuing liquidity crunch is not only bizarre, but increasingly concerning, as it means that not only did the rate cut not unlock additional funding, it actually made the problem worse, and now banks and dealers are telegraphing that they need not only more repo buffer but likely an expansion of QE... which will come soon enough, once the Fed funds hits 0% in a few days and is forced to restart bond buying to prevent the next crash.