Brian Chappatta, Columnist

Repo Meltdown Shows Budget Deficit Has Limits

Ballooning Treasury auctions have placed a heavy burden on the financial system, forcing the Fed’s hand.

September 26, 2019 at 11:00 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

There are simply too many bonds for primary dealers to handle.
Photographer: Eva Hambach/AFP/Getty Images

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The repo market madness lives on for a ninth day.

The Federal Reserve Bank of New York announced Wednesday that it would increase the size of its next overnight system repurchase agreement operation to a $100 billion maximum, from $75 billion previously, and also raise the limit on its 14-day term repo operation to $60 billion from $30 billion. Simply put, the bank wants to flood the funding market with enough cash to soak up all the securities that dealers submit1and leave no doubt that the critical financial-system plumbing is in fine working order ahead of the end of the quarter.