• Fedguy, the alias of former senior Fed trader Joseph Wang, has very good post on Quantitative Tightening, or QT. In the post he makes the point that QT will drain reserves from the banking system but not from the reverse repo facility, which currently warehouses about USD1.5 trillion in wholesale cash. As we explained in our Morning Comment from January 18, we reasoned the opposite will happen. QT will drain the reverse repo facility before reserves from the banking system are drained. That would justify SOFR rising to or even above federal funds rate by the end of the year, when we expect the Fed will have done enough QT so that recourse to the reverse repo facility is basically zero.


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