In Background, Discussion, Economics, Recession, World Economy

That feeling when all the numbers are so bad!CreditCreditPhoto illustration by The New York Times; Spencer Platt/Getty Images (stock trader)

Everyone’s been talking about REPO and although some are saying there is nothing to worry about — for example on Friday an article in the WSJ said Rest Easy: The Fed Isn’t Losing Control of Money Markets (paywall) — others are describing what’s happening as a crunch, a crisis, or chaos. Is Yanis Varoufakis right when he says that “the omens are clear and ominous” and that this is “the 2008 crisis that never went away morphed into something even uglier”?

Here, we present some of of the articles and opinions that have been doing the rounds on Twitter over the last seven days.

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Financial Times

New York Fed examines banks’ role in money market turmoil

Sept 20, 2019

Central bank questions hesitance to lend as overnight repo rates soared this week

Will stress in the repo market abate?

Sept 22, 2019

An abnormal bout of stress in one of the most vital sources of short-term funding for banks, which sparked concern across financial markets last week, will continue to be in sharp focus this week.

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The Street

NY Fed Doubles-Down on Repo Intervention as Bank Cash Crisis Rattles Markets

Sept 18, 2019

The New York branch of the U.S. Federal Reserve will step in and offer billions more in liquidity to gummed-up intrabank lending markets Wednesday, following the first intervention in more than a decade only yesterday, as a worrying spike in overnight borrowing costs continues to perplex investors and complicate today’s Fed rate decision.

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Bloomberg

Repo Crisis Becomes Machiavellian Investor Opportunity

Sept 21, 2019

“Never waste the opportunity offered by a good crisis,” is a quote first attributed to the Italian Renaissance writer Niccolo Machiavelli and repeated by politicians the world over ever since. It also became a main theme for fund managers this week as chaos roiled money markets, sending short-term interest rates surging.

Repo Market’s Liquidity Crisis Has Been a Decade in the Making

Sept 22, 2019

It sounds crazy: even National Public Radio is talking about repo rates. In normal times, not even Wall Street thinks too much about the arcana of short-term money markets. But over the past week, the Federal Reserve has had to work unusually hard to rein in a key policy rate after overnight repo lending dried up. Suddenly, everyone is asking the same question: what does it mean?

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New York Times

Sept 19, 2019

Wall Street is Buzzing About REPO rates. Here’s Why

The repo market channels more than $1 trillion in funds through Wall Street … And on Thursday, for the third time this week, the Fed pumped…

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Wolf Street

Sept 20, 2019

Fed Admits Failure of ‘Plan A’ to Control Money Market Rates, Shifts Back to Repos (which was ‘Plan A’ till 2008)

The hullabaloo in the repo market torpedoed the function of Interest on Excess Reserves and forced the Fed to go back to the future.

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CNBC

Sept 18, 2019

Fed loses control of its own interest rate as it cut rates — ‘This just doesn’t look good’

As the Fed was meeting to consider cutting interest rates, it lost control of the very benchmark rate that it manages. It’s been a rough week in the overnight funding market, where interest rates temporarily spiked to as high as 10% for some transactions Monday and Tuesday. The market is considered the basic plumbing for financial markets, where banks who have a short-term need for cash come to fund themselves.

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CNN

Sept 18, 2019

A crack just emerged in the financial markets: The NY Fed spends $53 billion to rescue the overnight lending market

Borrowing rates skyrocketed on Tuesday in a corner of the markets the public rarely notices but that is critical to the functioning of the global financial system.

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The Economist

(Pay wall)

Sept 19, 2019

Why the Fed was forced to intervene in short-term money markets

The repo rate spiked in an alarming echo of the financial crisis

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Market Watch

Sept 19, 2019

Here are 5 things to know about the recent repo market operations

Chaos in short-term funding markets this week led the Federal Reserve to step in with a series of overnight rescue operations to help keep credit flowing through the financial system.

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Zero Hedge

Sept 17, 2019

Something Just Snapped: Chaos Hits Repo Market As “Dollar Funding Storm” Makes Thunderous Landfall

Late last Friday, we warned that a “dollar funding storm” is set to make landfall in the US amid a series of converging sources of pressure that we said would result in “secured funding markets breaking higher.”

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Reuters

Sept 19, 2019

Repo chaos tests Wall Street confidence in NY Fed’s Williams

Wild swings this week in U.S. money markets have raised fresh concerns about whether the New York Federal Reserve under John Williams has lost its deft touch with markets.

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Econ Reporter

Sept 21, 2019

The repo spike is not liquidity crisis; it is a crisis for Fed’s floor system

The US overnight repo rate shot up to as high as 10% on Tuesday, prompting the NY Fed to stepped in and rolled out a USD 75 billion repo operation, or temporary open market operation, which in the end injected USD 53 billion cash into the short term money market.

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Editors’ Note: We don’t necessarily share the views we publish on New Cold War; however, we do attempt to provide readers with a range of views, because your right to make your own mind up depends on being fully informed.

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EDITOR’S NOTE: We remind our readers that publication of articles on our site does not mean that we agree with what is written. Our policy is to publish anything which we consider of interest, so as to assist our readers in forming their opinions. Sometimes we even publish articles with which we totally disagree, since we believe it is important for our readers to be informed on as wide a spectrum of views as possible.

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