Wall Street Giants Sound the Alarm: Currency Market Stress Could Trigger Another Crisis, Fed May Be Forced to Intervene
BlockBeats News, November 7th, According to the Financial Times, several Wall Street banks have warned that pressure in the U.S. money market could once again spike, prompting the Federal Reserve to take swifter action to curb a new round of short-term rate increases. Short-term funding rates stabilized this week after signs of stress in key parts of the financial system emerged last month, causing concern among some bankers and policymakers.
However, market participants are still worried about the risk of overnight repo rate spikes in the coming weeks. "I don't think this is just a one-off anomaly that lasts a few days," said Deirdre Dunn, Head of Rates at Citibank on Wall Street and Chair of the Treasury Borrowing Advisory Committee.
Scott Skyrm, Executive Vice President at repo market specialist firm Curvature Securities, added that although the market has "returned to normal," in part because banks have used the Fed's funding facilities to relieve pressure in the money markets, "funding pressures will resurface at month-end and year-end at the very least."
U.S. Bank Rate Strategist Meghan Swiber said, "With such an aggressive level of Treasury issuance, historically high by most measures, and the potential to saturate traditional investor demand for Treasuries, we believe a long-absent buyer is likely to need to step up: the Federal Reserve."
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