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The Fed Is Entrenched in the Repo Market. How Does It Get Out?

  • The central bank has plans to keep intervening into 2020
  • Participants want answers from Fed about long-term plans

At the Federal Reserve, 2020 will be all about making the repo market boring again. Policy makers will find this easier said than done.

The central bank’s liquidity injections -- including almost half a trillion dollars earmarked to ensure New Year’s Eve is a snooze -- and Treasury bill purchases have nudged the vital market for repurchase agreements back toward normalcy after a funding crunch sent rates soaring in September. This has anchored the Fed’s benchmark rate firmly within policy makers’ preferred range of 1.50% to 1.75% and caused T-bill yields to fall.