What’s happening in 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 because high as 10% on September 17. Yet banking institutions had been refusing to provide to one another, evidently moving up big profits to store their cash – in the same way they did within the housing marketplace crash and Great Recession of 2008-09.
Since banks weren’t financing, the Federal Reserve Bank of brand new York jumped in, increasing its overnight repo operations to $75 billion; as well as on October 23 it upped the ante to $120 billion in instantly operations and $45 billion in longer-term operations.
Exactly why are banks not any longer lending to one another? Will they be afraid that collapse is imminent someplace in the system, just like the Lehman collapse in 2008?
Perhaps, and when so that the suspect that is likely Deutsche Bank.more