The Fed's recent repo crisis was the fault of big banks and hedge funds, new study finds

Reuters September's repo-rate spike was driven by big banks and hedge funds, the Bank for International Settlements wrote in a report released Sunday. The overnight lending market relies on four major US banks and their cash reserves, but as the institutions sink more capital into Treasury bills, a smaller proportion of their reserves are available for quick funding. Hedge funds contributed to the squeeze by increasingly using Treasury repos to fund arbitrage trades, the report found. The borrow...