In the wake of last week's repo market panic, I realized that there is much more to be said about its implications - and what it all means for you and your money.
First, let's be clear that the repo market is not the bond market, but rather a clever little corner of the market casino designed to allow major banks and a few other non-bank and quasi-government entities to make short-term (often overnight) loans on an as-needed basis.
With this in mind, many readers have naturally asked why the big banks, so flush with post-2008 reserves, would ever need such "loans."
Additionally, other readers, those admittedly new to the variant and rigged mechanizations between D.C. and Wall Street, have been pondering what all of this sudden (and narrow) repo noise has to do with their own money and the broader risks facing the markets.
Well, the answers will likely tick you off.
As to the first question, you are correct to ponder why the big banks, so flush with reserves, need a repo market's overnight loans at all.
In fact, the blunt truth of the matter is they don't.