The Federal Reserve Bank of New York has a well-earned reputation for fighting fires in financial markets, particularly in the arcane and crucial realm of short-term funding for banks and investors.
For the second day running, the New York Fed has turned on its fire hose and pumped money into the financial system. There are signs that the $75bn it made available on Wednesday will help calm funding pressure in a geeky but important part of the bond market’s plumbing, the repurchase or repo sector.
Many will recall that troubles in the repo market, where banks and investors borrow cash overnight using Treasuries as collateral, were a symptom of funding problems for investment banks in 2008.
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