Will the Fed pass its year-end funding test?

US dollar under magnifying glass

The spike in US Treasury repo rates on September 17 was close to a 30-sigma risk event – it was unprecedented. And, despite fair warning that tax payments and Treasury issuance would remove cash from the financial system in the days prior, funding pressures caught many, including the Federal Reserve, completely off-guard. To regain control over rates, the Fed has moved to undo its balance sheet normalisation process, injecting funds in the financial system at levels not seen since the 2008

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