US repo-market rate spike

Conditions at the time

The level and distribution of bank reserves affected smooth market intermediation.

How events unfolded

On 9/16–17, transaction rates in repo and federal funds markets rose sharply.

Stakeholders and impacts

Banks, dealers, cash providers and the New York Fed responded to changing funding demand.

Information available at the time

Corporate-tax payments and government-bond settlements were identified as factors increasing short-term funding demand.

Findings confirmed later

Federal Reserve research explained that constraints on market participants’ trading mattered alongside aggregate reserves.

Alternative interpretations and limitations

Do not extrapolate a short-term rate spike into insolvency at all banks or a general financial crisis.

Source-based context and interpretation

Fed researchers linked tax payments and Treasury settlement to lower reserves and greater dealer financing needs. Supply did not respond quickly despite higher rates; distributions returned closer to normal the day after New York Fed repo operations. Collateral did not guarantee smooth cash intermediation. ASSETCASTING interpretation: Safe collateral differs from timely cash access. Stabilizing funding rates does not resolve every borrower's profitability or credit risk. The researchers' account of supply-demand and intermediation frictions is not a definitive single-cause verdict.

Evidence coverage through 2020-02-27 · Sources checked 2026-10-14

• What Happened in Money Markets in September 2019? ↗

Related events and periods1

• Financial-crisis response and unconventional monetary policy →

  An event or period whose recorded start falls within this editorial interval. This does not establish that it caused or represents the characteristics of the era, nor guarantee that the entire period falls within the interval.