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Business & Technology

Analysts: Repo Shock Linked To US Banks' Reluctance To Lend Cash

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Analysts: Repo Shock Linked To US Banks' Reluctance To Lend Cash

2019-12-11 07:29:511 Oct 2018 01:53 AM EST

Cash available for the top four US banks' short-term funding all but dried up in late September. Then, interest rates deep in the plumbing of U.S. financial markets climbed into double digits. The banks' unwillingness to lend cash, plus a burst of demand from hedge funds, could explain the spike in money market rates. Analysts say the growing reliance on the biggest U.S. banks to keep the repo market functioning may have been a big factor. According to Reuters, the big four banks have become net providers of funds to repo markets. They account for more than half of all Treasuries held by banks in the United States at the Federal Reserve. The repo market underpins much of the U.S. financial system, helping ensure banks have liquidity to meet their daily operational needs.

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