Wall Street Giants Sound the Alarm: Currency Market Stress Could Trigger Another Crisis, Fed May Be Forced to Intervene

November 7th. According to the Financial Times, several Wall Street banks have issued warnings. They state that the pressure in the U.S. money market may once again surge, which could prompt the Federal Reserve to take more prompt actions to restrain a new round of short-term rate hikes. This week, short-term funding rates have stabilized after signs of stress emerged in key parts of the financial system last month, causing concerns among some bankers and policymakers. However, market participants still have worries about the risk of overnight repo rate spikes in the coming weeks. Deirdre Dunn, the Head of Rates at Citibank on Wall Street and the Chair of the Treasury Borrowing Advisory Committee, said, "I don't think this is just a temporary anomaly that will last for a few days." Scott Skyrm, the Executive Vice President at the repo market specialist firm Curvature Securities, added that although the market has "returned to normal" to a certain extent because banks have used the Fed's funding facilities to relieve pressure in the money markets, "funding pressures will reappear at least at the end of the month and the end of the year." U.S. Bank Rate Strategist Meghan Swiber said, "With such an aggressive level of Treasury issuance, which is historically high by most standards and has the potential to saturate the traditional investor demand for Treasuries, we believe that a long-absent buyer is likely to need to take action: the Federal Reserve."