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Opinion
Brian Chappatta

Repo Meltdown Shows Budget Deficit Has Limits

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

There are simply too many bonds for primary dealers to handle.

There are simply too many bonds for primary dealers to handle.

Photographer: Eva Hambach/AFP/Getty Images

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 submit and leave no doubt that the critical financial-system plumbing is in fine working order ahead of the end of the quarter.