Repos: No, the Fed isn’t coming for your car—but it still could signal a problem
This week the Fed has had to intervene several times in the cash markets to provide liquidity where buying demand dried up, Treasuries were oversupplied and consequently rates spiked. The so-called “Repo” operation, allows primary dealers to exchange collateral for cash, up to $75 billion worth each day. In this way, the Fed can keep short-term rates within its target range—an important part of implementing its monetary policy. Depending on the reporting source, overnight rates were said to have spiked to 8-10% at one point prior to Fed intervention.