Unpredictable Premonition
Monday, September 23, 2019
Be wary of this signal. All of sudden, the short term debt market in Wall Street experienced a great volatility. The repo rate, the interest rate for overnight loans between banks and financial institutions, saw repeated sharp jumps, even reaching five times its normal rate. This situation merits further attention as an early premonition for a deep financial crisis.
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NORMALLY, the overnight repo rate in Wall Street does not move too far from the movements of the United States Federal Reserve rates. Since August, this repo rate has had an average of only 2.2 percent. But since Tuesday, September 17, the repo rate suddenly skyrocketed to over six percent, a sign of tight liquidity in the market.
Since then, until the deadline of this column three days after, the repo rate in Wall Street has continued to rise h...
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