Squeezed or saved? Market divided over year-end repo stress

Fears of a cash-crunch hang heavy despite Fed’s repo giveaway and move to term funding

Countervailing forces are at work in the US repo market, leaving traders wondering just how bad things could get at year-end.

On the one hand, scarce reserves and elevated systemic risk scores at the largest US repo dealers suggest a major funding squeeze is in the offing. But some say the Federal Reserve’s repo operations, coupled with a marked shift to term funding and central clearing, could be enough to keep a lid on rates.

Much will depend on how the four largest US repo dealers manage