Stress in the short-term funding market appears to be rising despite seven consecutive days of intervention by the Federal Reserve Bank of New York.
The N.Y. Fed said on Wednesday that it would increase the size of overnight cash loans offered to financial firms from $75 billion to $100 billion. The Fed has been offering cash through repurchase agreements, or repos, to hold down interest rates in the short-term funding market since Tuesday of last week.
The announcement came hours after the N.Y. Fed reported that it had received $92 billion in bids for the $75 billion offered on Wednesday.
Demand for liquidity in the form of cash is expected to keep rising as the end of the quarter approaches and banks seek to meet regulatory requirements.
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