Collapsing market liquidity is flashing red everywhere. The Federal Reserve’s Repo hit a record 351BN, its biggest weekly jump in history in the first week of November. The Repo market is an important component of the capital market, which provides short-term liquidity The last time the $3 trillion Repo Market blew up was in mid-September 2019 when the Repo rates spiked to 10%. I remember forecasting market turbulence, bearing...
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The $3 trillion daily Repo market isn’t usually on the investors’ radar until the Repo market blew-up in mid-September when the Repo rates spiked to 10%. For the financial system, the severity of a sharp rise in the cost of a $3 trillion short-term lending market is similar to a major electrical substation of the city failing. A crisis in the Repo market would spread to other tentacles of the financial system, with the...
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