market

New York Fed’s latest repo auction met with strong demand


Investors snapped up a further $25bn in short-term loans from the Federal Reserve on Monday, seeking to shore up financing over the end of the year.

It marks the third “repo” operation in which the New York branch of the US central bank has offered the loans in exchange for Treasuries and other high quality collateral.

The New York Fed hopes the efforts will ease cash constraints heading into the end of the year and help avoid a repeat of the sharp spike in overnight borrowing costs that occurred in September. The repo operations were restarted following that incident.

Demand was in line with last week’s operation at $43bn for the $25bn on offer.

The continued demand for cash despite the Fed’s operations has unnerved some investors, concerned it could spell stress in the market closer to the end of the year: banks typically step back from the market to shrink their balance sheets ahead of important regulatory calculations on December 31.



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