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Disruption In The Repo Market - A Sign Of Systemic Issues, Tinatin Bezhanidze
Disruption In The Repo Market - A Sign Of Systemic Issues, Tinatin Bezhanidze
Senior Projects Spring 2020
The Repurchase Agreement (repo) market is an essential part of the financial system. Thus, a disruption in the repo market in September of 2019, leading to the first Federal Reserve intervention since the Global Financial Crisis, sowed panic. This paper discusses some of the possible explanations of the repo crisis, such as tax payments draining liquidity at the same time as the Treasury bonds were settled, changes in regulations leading to inability to use the reserves on the market, a problem of market domination and change in behavior of the non-bank participants. It builds on the theories of the economist …