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Repo Rout Didn’t Have to Happen. Powell Is Trying to Avoid Rerun

  • Critics argue that the Fed delayed action as reserves crumbled
  • Fed saw no need to rush permanent fix, person familiar says
Jerome Powell on Oct. 8.
Jerome Powell on Oct. 8.Photographer: Daniel Brenner/Bloomberg
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Before the U.S. repo market went haywire in mid-September, there were persistent signals for about a year that something was off.

Rates had developed the troublesome habit of jumping at the end of months and quarters -- most notably in December 2018 when overnight rates surged above 6% -- as banks withdrew cash to meet regulatory requirements while new Treasury securities flooded the market, knocking supply and demand out of balance.