US quarter-end came with repo market stress, which saw a double-digit rates spike and an uptick in standing repo facility use. That’s focused attention on funding pressures as the Fed’s quantitative tightening program progresses against the backdrop of a policy shift from abundant to ample reserves. How concerned should market participants be, and how will the repo market know when we reach an ample reserves environment? We review recent comments from Robert Perli, manager of the System Open Market Account (SOMA) at the New York Fed, and hear from Stephen Malekian, securities finance expert, about why some market participants believe the repo market is headed for year-end volatility.
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