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To: Mark Adams who wrote (201016)	10/30/2002 12:40:25 AM
From: GraceZ	Respond to of 436258

RPs or repos, as I'm sure you've heard me say before, are primarily used to defend the interest rate target. While they are temporary in nature they do constitute part of the money supply in that they are persistent enough to have a float factor. They are used to resolve temporary supply demand fluctuations which might cause the Fed interest rate target to rise or fall. AFAIK there has not been a large percentage change in the RP float in the last five months that would make up for the decrease in permanent creation. Contrary to popular myth, the Fed makes coupon passes in response to demands for currency. If you look at the April '01 total it is huge. April is a month where people sell stock and put the proceeds in the bank in order to pay taxes, we also had a big sell off. A market sell off raises margin loans, market rallies raise margin loans, any big market movement raises demand for funds. People also fund pension funds in April. They frequently borrow money to fund them so banks have to beef up their reserves.