‘The Levee Has Broken’: Misbehaving Repo Market Underscores Loss Of Fed Control
You can probably expect another IOER "tweak" from the Fed on Wednesday, or even "emergency" action before then, in an effort to alleviate an acute funding squeeze.
"The USD funding levee has broken", BofA's Mark Cabana wrote Monday evening, following a spike in GC repo around large coupon settlements and this month's corporate tax payment deadline, which is expected to suck between $75 and $100 billion out of funding markets.
Monday's (mis)behavior in GC repo spilled over, with widening in FRA
The deluge of new supply is finally impacting the market via repos rather than yields to start?
Bad timing if the McElligot/Marko unwind trade continues.
If the repo market is borderline illiquid without a fed backstop, doesn’t that suggest the whole system is little more than a house of cards?
what is ” GC repo”? here’s a basic little power point I found: http://people.stern.nyu.edu/jcarpen0/courses/b403333/08repo.pdf