Reverse Repo Home Stretch, Miners Back Near All Time Lows Vs Gold

Will They Ever Prove Their Worth? Absolutely, when all the fake money bubbles finally pop, resources divert to real money producers.

• We're nearing the final $100B in RRPs, likely hitting zero by January 2nd when the debt ceiling kicks back in.

• The decline of the yen is holding above a 4-year trendline, with potential BOJ actions impacting Treasury yields.

• Bullion banks have been shouldering the bulk of gold shorts since 2019.

• The Gold:HUI ratio shows mining stocks are near all-time lows vs gold.

“Home Stretch”

We're in the Final $100B RRP Home Stretch

We're finally down to the double digits. Or the undeca-digits if we're being snooty. $98B left.

If we do hit zero, it will likely be on January 2^nd, when the debt ceiling kicks back in and the end of year turn completes. Then, temporarily, RRPs will be refilled by the Treasury's bank account [TGA] at the Fed as they spend down the balance of dollars they already have. Once the debt ceiling is lifted, and it eventually will be before the Federal government runs out of cash because that's what Trump wants, the tide from TGA to RRP will go back out and the RRP money will shift back into the TGA through the issuance of new T-bills. Once it hits zero again, I would expect a banking mishap/repo clog to happen shortly afterwards. Reuters tries to put it lightly this way:

Dallas Fed chief Lorie Logan has noted she expects reverse repo balances to head to near zero levels. Doing so would almost certainly mean that ongoing efforts to shrink the size of Fed holdings would start eating into bank reserves, marking the final stage of extinguishing pandemic-era levels of Fed market support.

The RRP interest rate was indeed pushed down 5bps relative to the fed funds rate. The goal of that is to insure maximum liquidity into the year-end turn without looking like a panic move, so that the repo market can squeeze through the year-end turn without seizing up and causing an avalanche. That's not what they'll tell you on Bloomberg or FT but that's why they did this "technical adjustment" I think.

Detractors may claim that the last time RRPs zeroed out, nothing happened. That's true, but consider this chart: