Fed Term Repo

Think of it this way

An overnight repo is lending a friend money until tomorrow. A three-month one is co-signing their rent for the quarter. The amount may be the same; the message you send is not.

What is Fed Term Repo?

The part of the Fed's repo with a maturity of more than one day. In an overnight repo the Fed lends cash this afternoon and gets it back tomorrow; in a term repo it lends it for 14, 28 or up to 84 days. The mechanics are the same —cash against Treasury bonds— and the only thing that changes is how long that cash stays in the system. Between September 2019 and July 2020, 36% of all Fed repo was term repo.

How to read Fed Term Repo

Almost always at zero, which is why every bar counts. What is relevant is not the amount but that it exists: the Fed turns to term operations when it concludes that the funding problem will not fix itself overnight. Compare it with the total awarded on the same chart: the larger the term share, the more serious the Fed considers the situation. Lag: none, or +15 days at most: the cash is already in the accounts.

What Fed Term Repo means for the market

It is the difference between a Band-Aid and a course of treatment. An overnight repo covers a one-off mismatch —a tax deadline, a quarter-end— and is gone the next day. A 28-day repo tells the market it can count on that cash for a month, and that changes traders' decisions: someone who knows their funding is secured holds positions they would otherwise have liquidated. That is why term operations tend to coincide with market bottoms better than overnight ones.

Where the money flows

From the Fed to banks and dealers, just like overnight repo, except that the money stays for weeks. Example: in October 2019 the Fed lent for 14 days. The dealer that received that cash could count on it for two full weeks instead of having to return it the next morning, and that allowed it to hold positions it would otherwise have had to sell.

What to watch in Fed Term Repo

Treat it as a switch, not a figure. A single term operation appearing after years at zero is more informative than a 20% rise in overnight repo. And bear in mind that since 2021 they have hardly been used: the system relies on the permanent overnight window.

A commitment by the Fed for weeks ahead, not for one day. It is the signal that the problem is not considered temporary.