Odd Lots · Thursday, August 6, 2026
The Foreign and International Monetary Authorities REPO Facility (FEMA) is discussed as a tool allowing foreign central banks to repo treasuries for dollars, avoiding direct sales into the market. While providing flexibility, criticisms include its premium above market rates and a cap of $60 billion, potentially limiting its utility for large-scale interventions.
“The basic idea is that central banks have a lot of really good collateral and if they need cash, they don't actually have to go and sell the treasuries into the cash bond market. They can just repo them at the FED, get dollars and then intervene that way, and it's zero risk to the FED, and the FED can always offset any monetary impact with its domestic operations, so there's no necessary monetary impact.”
“You know, why do it with the FED rather than with a Well, first of all, I guess you know the FED, you know, not in this case is a little quieter as a counterparty. I mean, it is disclosed, but with a weak lag it is in theory. You know, if you get rid of the cap, it's unlimited in the quantities, and then the premium is there. It's not huge, but you know, you can debate where it is not. It was not meant to be used as a as a substitute for REPO in ordinary conditions, so it does have a premium.”