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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First the US yield curve inverted & $18 trillion of debt fell into -ve yields. Now we are in the 3rd day of a REPO crunch. The omens are clear & ominous: The 2008 crisis, that never went away, is morphing into something even uglier. Meanwhile, for the EU it is…business as usual
— Yanis Varoufakis (@yanisvaroufakis) September 19, 2019
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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.
