What’s taking place when you look at the repo market? Rates on repurchase agreements (“repo”) should always be around 2%, on the basis of the fed funds price. Nevertheless they shot as much as over 5% on September 16 and got since high as 10% on September 17. Yet banking institutions had been refusing to provide to one another, evidently passing up big earnings to keep their cash – just like they did within 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. […]