Part 2/11:
The story begins in September, with the Fed's repo facility coming into focus amid concerns over liquidity. Initially, the surge was attributed to seasonal bottlenecks and quarter-end adjustments, with modest borrowings of a few billion dollars. At that time, the market believed that these technical factors were benign, especially as measures like the effective federal funds rate remained within the Fed’s target range, and repo rates stayed relatively stable above the upper limit.
However, these calm assumptions changed as the weeks progressed. Earlier in October, borrowing from the Fed's repo facility started to climb, reaching into the billions—a sign that liquidity strains were intensifying even before the latest escalation.