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Reverse Repos

May 26, 2022

 

 

Hello everyone. Welcome to the English for Economists. These are short English lessons that are meant especially for people working in economics and finance.

This is podcast lesson number 41, and today is May 25, 2022.

In today’s lesson, we’ll take a look at recent behavior in money market funds. There is a flight to quality these days, brought on by decreasing stock prices, and a lot of post-covid stimulus cash moving around. Since the Fed has reduced the number of short-term Treasury Bills it is issuing, money is getting parked in something called reverse repos.

So, today’s lesson is about money markets, and you’ll learn –– or at least you will review –– the following words and acronyms.

  • Stash
  • Record
  • Flock
  • RRP
  • Scale back
  • Surge

 

Now, all of these words come from this headline that was published recently in the Financial Times.

 

Okay. That’s a lot of information transmitted in very few words. That’s why the vocabulary used in headlines can be so useful for you. They are usually words that are very rich in meaning.

 

Let’s start with the first line: Banks and funds stash record $2tn overnight at Fed facility

Two words to look at here: The verb “stash” and the adjective “record”.

So, to “stash” means to store something, especially a large amount of money, in a safe place.

Sometimes “to stash” can also have the meaning of “to hide”, for example, “she stashed her money under the mattress to keep it safe”.

To stash.

Next, the word “Record”. Now, this is an adjective. It qualifies the noun phrase “$2tn”. It was a record amount of money deposited. There had never been so much. It was a record.

Now, don’t confuse this with the verb “Record”, as in, I use a microphone to record my voice.

Next line: Investors in search of safe assets flock to overnight RRP

Here, “flock” means “to move together”.  Birds flock, by the way. They travel in large groups. In fact, a group of birds is called a flock. Flock.

RRP? These are Reverse repurchase agreements. Repos and reverse repos are used for short-term borrowing and lending, often overnight. RRP.

Okay. Last line: Hedge funds scale back bets on US stocks as losses surge

So, “scale back” is to reduce. To make it smaller. And in this case, they are scaling back their bets in the US stock market as losses “surge”. Scale back.

Now, we’ve seen the word “surge” a few times in these. “Surge” means a sudden, strong increase. So, in this case, the strong, sudden losses on bets in US stocks, is pushing banks and hedge funds into reverse repos. Journalists love to use the word “surge” because it really transmits energy.

Okay. That’s all for this lesson. I hope you learned something new and you would like to see more lessons in English for economics and finance, give it a like or write a review. That is big help for me.

Keep studying and you’ll keep learning. It really is as simple as that.

Until next time, this is Alan Robert. Goodbye.

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