Part 4/11:
This dramatic spike in repo usage is far beyond usual seasonal adjustments or technical glitches, signaling a significant escalation in market stress. Importantly, this isn’t merely due to October 31st month-end factors, as such effects are minimal in money markets, emphasizing that something more profound is at play.
Market Rates Reflect Volatility and Risk Aversion
Alongside the repo surge, money market interest rates have also moved sharply. The effective federal funds rate remains within the Fed’s target range, but the Sofia rate (a benchmark for repo transactions) has climbed above the upper limit, indicating increased risk premiums and market volatility.