The Wall Street Journal writes an odd piece about year end volatility in repo rates in "Some Investors Resolve to Ring In the New Year by Lending Cash." They explain, "Some investors expect a new surge of volatility in short-term money markets at year-end and are preparing to take advantage, gathering cash to lend overnight in the market for repurchase agreements, or repos.... The cost of borrowing overnight using repo has spiked at the end of recent quarters and at the end of 2018, when a scarcity of available cash drove rates as high as 6%.... Though the Federal Reserve has been lending billions of dollars each day in the repo market, some analysts and bankers are concerned that the central bank's method for providing funds limits the benefits of those loans, opening the door to volatility." It adds, "For those who lend in the repo market, such as money-market funds and other investors with available cash, that scenario could present an opportunity. Jeffery Elswick, director of fixed income at Frost Investment Advisors, said he benefited from having an unusually large amount of cash in September available to lend in the market. That experience drove him to plan for another year-end event, even though he acknowledges that the Fed could ramp up its lending programs enough to minimize any spikes." Finally, the WSJ says, "Yet, almost two months after the September repo market disruption—and almost two months of measures to provide liquidity from the Fed-demand for cash isn't subsiding. This month, banks and other borrowers are bidding for an average of about $74 billion in overnight cash loans from the Fed a day -- about a 25% increase from last month. Central bank officials have said they plan to continue offering the loans into the second quarter."

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