What’s taking place into the repo market? Rates on repurchase agreements (“repo”) ought to be around 2%, on the basis of the fed funds price. Nonetheless they shot as much as over 5% on September 16 and got up to 10% on September 17. Yet banking institutions were refusing to provide to each other, evidently moving up profits that are big store their cash – just like they did into the housing marketplace crash and Great Recession of 2008-09.
The Federal Reserve Bank of New York jumped in, increasing its overnight repo operations to $75 billion; and on October 23 it upped the ante to $120 billion in overnight operations and $45 billion in longer-term operations since banks weren’t lending. Continue reading