Repo Rate Spike Pointing to Funding Problems on Wall Street
In this report, I cover the early market action from London on Tuesday, September 17th, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I look at an article posted yesterday in Zero Hedge about what is being called the Chaos in the Repo Market. Before I look into the story I will go through what the repo Market is and what its purpose is as well and how important it is to a well functioning financial system and as a result the economy too.
According to the ZH story the overnight repo rate spike yesterday from 2.25% to 4.75%. What this means is that some Wall Street institutions are having trouble financing their overnight operations and this could be pointing to signs of stress in the financial system.
This spike in the overnight repo rate could, of course, be a one-off but if not as Zero Hedge pointed out it could mean that the financial system or Wall Street's plumbing could be clogged up so to speak and that it could lead to more money printing or QE from the Federal Reserve.
"Something Just Snapped: Chaos Hits Repo Market As "Dollar Funding Storm" Makes Thunderous Landfall": https://www.zerohedge.com/markets/something-just-snapped-chaos-hits-repo-market-dollar-funding-storm-makes-thunderous
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Tylers are a bunch of drama queens, with their 1 minute chart collapses. I don't pay attention anymore.
learning a lot from you, thanks for explaining