The US Federal Reserve’s unprecedented 10-month intervention in short-term borrowing markets has been wound down, after the central bank successfully tamed volatile funding costs that had threatened to cause disruption across the financial system.
The volume of the Fed’s operations in the repo market, where investors swap high-quality collateral like US Treasuries for cash, fell to zero this week after the central bank’s latest 28-day loan matured on Tuesday, taking a final $53.2bn out of the market.
Scott Skyrm, a repo trader at Curvature Securities, called it an “important” moment signalling a return to normalcy in the market.
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