Eurodollar University BREAKING: Fed Repo Usage EXPLODES to Banking Crisis Levels
Nov 1, 2025
Recent turmoil in the Fed's repo facility raises eyebrows as usage soars to alarming levels. September spikes were initially dismissed as seasonal, but October's explosion to $50 billion shows deeper issues. Jeff analyzes repo volatility's impact on money markets and how market stress might lead the Fed to adjust its strategies. Concerns about collateral and risk aversion suggest tightening isn't just a technicality. The potential global implications from these changes add urgency to monitor the situation closely.
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Repo Usage Suddenly Explodes
- The Fed's overnight and afternoon repo use has escalated sharply since mid-September, culminating in a dramatic jump to about $50 billion on one day.
- Jeff Snider ties this escalation to stress in the Eurodollar/shadow banking plumbing rather than mere technical bank reserve adjustments.
One-Day Spike Exceeds Prior Bumps
- Morning repos hit nearly $20 billion and afternoon repos added about $30 billion, totaling over $50 billion in one day.
- Snider argues that this rapid jump far exceeds prior small increases and signals real market stress beyond routine seasonality.
SOFR Shows Repo Market Stress
- SOFR and repo rates have become more volatile and occasionally sit above the Fed's target range, showing stress in the repo market.
- Snider emphasizes SOFR better reflects repo market strain than fed funds, which the Fed focuses on for policy.