Wall Street giants issue warning: mounting pressure in the money market could trigger another crisis, forcing the Federal Reserve to intervene

BlockBeats News, November 7, according to the Financial Times, several Wall Street banks have warned that pressure in the US money markets may erupt again, prompting the Federal Reserve to take swifter action to curb a new round of short-term interest rate increases. Short-term financing rates have stabilized this week, but signs of tension in key parts of the financial system last month have raised concerns among some bankers and policymakers.

However, market participants remain worried about the risk of repo rates spiking again in the coming weeks. "I don't think this is just an isolated abnormal fluctuation lasting a few days," said Deirdre Dunn, head of rates at Citi on Wall Street and chair of the Treasury Borrowing Advisory Committee.

Scott Skyrm, Executive Vice President at repo market specialist Curvature Securities, added that although the market has "returned to normal," partly because banks have used the Fed's funding mechanisms to ease money market pressure, "funding pressure will at least return at the end of next month and at year-end."

Meghan Swiber, US rates strategist at Bank of America, said: "Such an aggressive scale of Treasury issuance is high by historical standards and could exhaust traditional investors' demand for Treasuries. To better balance Treasury supply and demand, we believe a long-dormant buyer will likely need to step in: that is the Federal Reserve."