Repo-Market Spikes Conjure Memories of September 2019 US Funding Turmoil
- Funding squeeze drove SOFR benchmark to an all-time high
- Latest issues driven by lack of dealer balance-sheet capacity
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Spikes in a key short-term interest rate are raising eyebrows in the arcane-but-vital overnight funding market, drawing unsettling comparisons with turmoil that rocked the space more than four years ago.
Strains started showing up late last week. The bond-buying frenzy that stoked November’s US debt rally led to a surge in demand for financing in the market for repurchase agreements, where participants engage in short-term lending or borrowing that’s collateralized by government securities.