2024-02-15 23:50:00 ET
Summary
- The Fed’s close monitoring and well-signaled tapering of QT should prevent disruptions to the short-term funding markets - despite converging risks.
- Declining cash reserves across the US financial system have some market observers predicting a liquidity crunch in the funding markets. We disagree.
- The RRP is a useful tool of last resort when short-term funding alternatives are in short supply. Only a year ago, RRP reserves ballooned to roughly $2.5 trillion.
By AJ Rivers, CFA, FRM, CAIA and Lucas Krupa
The Fed’s close monitoring and well-signaled tapering of QT should prevent disruptions to the short-term funding markets - despite converging risks. ...
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For further details see:
Keeping An Eye On Liquidity As Risks Converge