Proper Presents “Dark Corners”: Trouble in the Repo Market image

The repo market has been stressed recently and the Fed has had to step in and inject a lot of capital to help alleviate the problem. But they don't know what's causing the problem or how much money it will take to fix it. In this Dark Corners, we will explore the repo market in more detail. But first, what is a repo? “Repo” is short for repurchase agreement. A repurchase agreement is essentially a short-term loan, usually between banks. Imagine you are a bank and you have clients who need to make payroll, but you don’t have enough cash on hand to cover the withdrawal. So you pledge a portion of your holdings (typically ...
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