Repo Rate Spike Forces Depository Rates Down – Why?
Volatile Rates Ahead?
Basic supply and demand forces dictate volatile deposit rates well into 2020
Read why below.
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Does the Rate Spike Signal Difficult Times in 2020?
Lake Forest, IL (October 21, 2019) On September 16, 2019 two dramatic rate spikes happened: Repurchase Agreements (Repos) rates went from about 2 percent to 10 percent, and simultaneously Money Market Deposit Accounts (MMDAs) rates dropped over 5 percent the first week and 10% in two weeks at banks, credit unions and thrifts. “These are significant rate shifts,” exclaims Michael Moebs, Economist & CEO of Moebs $ervices the economic research firm who did this Rate Study.
The Repo spike increased borrowing costs $876 Million for the day, and for MMDAs about $15 Billion for the year.
A Repo is a secured loan made by banks, credit unions and corporations with each other to buy or sell excess balance sheet funds. On average Repos transactions total about $4 Trillion (T) a day. Total MMDAs balances are about $8T for all depositories for the past year.
“The most interesting detail: no one initially knew what caused these rate spikes,” says Moebs
What’s the Cause of These Rate Spikes? READ FULL ARTICLE
Written By: m.moebs
Date Posted: 10/21/2019
Number of Views: 25