OFR, Report: Anatomy of the Repo Rate Spikes in September 2019

“This paper is the first to bring together intraday timing data on the tri-party and cleared segments of the repo market for the purpose of studying the causes of the unusually large interest rate spike in repo markets in September 2019. We conclude that, in large part, the spike resulted from a confluence of factors—large Treasury issuances, corporate tax deadlines, and an overall lower level of reserves—that, when taken individually, would not have been nearly as disruptive. In addition, we highlight how a lack of information transmission across repo segments and internal frictions within banks most likely exacerbated the spike. These findings are instructive in the context of repo market liquidity, demonstrating how the segmented structure of the market can contribute to its fragility.”