What up with that? Financial markets have gone crazy as liquidity seemingly vanishes.
(Bloomberg) — The U.S. money-market interest rate remained elevated for a third straight day, after rising to a record Tuesday.
The rate on overnight general collateral repurchase agreements, or repos, was at 2.8% early Wednesday, based on ICAP pricing. On Tuesday, it jumped to 10%, about four times greater than last week’s levels, as cash reserves in the banking system remained out of balance with the volume of securities on dealer balance sheets.
Today there was a whopping $80.05BN in bids submitted, an increase of $27 billion, or 50% more than yesterday.
It also meant that since the operation – which is capped at $75BN – was oversubscribed by over $5BN.
And the New York Fed’s Secured Overnight Financing Rate soared.
Uh oh. Has The Fed lost control?
Photo from Jesse’s Cafe Americain.