Then, after the Fed launched QE across the entire curve and expanded it to include MBS, the Fed's monetary police became outright bizarre: on one hand the Fed was offering to buy Treasurys and MBS held by Dealers (at a hefty, unknown premium to market), on the other it was offering Dealers to park those securities at the Fed either overnight or on a term basis in exchange for cash while incurring modest capital charges.

After all, why would anyone pick repo over QE in the current market was a total mystery.

Today's other repo operation, the $500BN overnight repo saw just $1.5BN in TSYs submitted (the remaining $5.25BN were MBS) into the $500BN operation.