Bankers warn money market rates could hit Fed’s QT plans

Shrinking Fed bond portfolio could squeeze bank liquidity, though money funds remain flush


Market participants are divided on how far the US Federal Reserve will be able to proceed with its quantitative tightening programme before banks start to face liquidity constraints.

“There are some signs of modest… repo funding ripples, where you are starting to see that repo increases a little bit and it stays higher for slightly longer,” said Mark Cabana, short-term interest rate strategist at Bank of America. “We see real risks that they turn into large waves by the end of next year, and

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