Rates on short-term repos briefly spiked to nearly 10% last week as financial companies scrambled for overnight funding. Last night the Federal Reserve Bank of New York added $110.1 billion to the financial system.
The borrowers are often banks, securities firms or hedge funds that use the cash to finance positions in the market. The lenders can include money-market mutual funds, banks or hedge funds that are seeking to earn a slightly higher rate of interest than what is available from holding short-term treasuries.
Banks asked for $72.75 billion in 14-day cash loans, and in a second separate operation, banks asked for $50.1 billion in overnight reserves. Officials said Wednesday that they were increasing the amount of funding being made available through the repo market after requests by banks for cash at offerings on Tuesday and Wednesday were not met.
Thursday’s infusions were the 9th and 10th times since last week which the Fed has intervened to calm markets.The actions of handing out these repo loans were the first time since the financial crisis that the Fed had taken such actions.