A Nov. 19 Reuters article includes the following shocker of a comment by a “head of rates strategy” at a securities firm: “We suspect that markets may be more vulnerable to overnight funding rate pressure than they were in 2019.”
That would be the year of the sudden Sept. 16-17 spike in the repo rate from 2% to 10%, forcing the “QE-5” bailout less than three weeks later. Reuters reports that the federal funds rate, pulled upward slowly (so far) by the repo rate, is at 4.05%; it has escaped the Federal Reserve’s designated range of 3.75-4.00. They derive from this, that banks’ reserves (held at the Fed) are low and under pressure (no longer what the Fed calls “ample"), presumably due to recent losses from consumer debt companies and big tech firms.
