What are Repos?

The Fed makes injections of Repos (Repurchase Agreements — usually TOMOs — Temporary Open Market Operations typically expiring in 1 to 30 days) into the market most business days.

Repurchase Agreements are loans (at Fed Fund rates) issued daily, in amounts typically ranging from U.S. $1 to U.S. $20 billion, by the Federal Reserve to Primary Dealers, the proceeds of which can be used to buy, for example, Dow index futures, if the Fed seeks to boost the Dow. The total amount of un-expired Repos on any given day constitutes the “Repo Pool.” (i.e. the ‘Slosh’ shown above’). Monitoring changes in Repo Poll levels (which is publicly available information) is crucial to determining how the interventions might affect the markets (assuming you wear a tin foil hat like me).

While the Repo Pool is one vehicle for manipulating the markets it is not the only one - interventions can and do occur without changes in the Repo Pool. It now appears that The Fed uses TSLF injections and TARP funds to intervene as well - which is why you need to select the TAF option (you can leave out the TIOs).