US funding chaos a sign of trouble?

It must be realised that the Fed has calculated there should be excess reserves; the suspicion is that lenders may be ‘hoarding’ the liquidity for fear of non-repayment, said Inter-Pacific Securities head of research Pong Teng Siew.

THERE was concern over US funding chaos recently and the size of Federal Reserve intervention as such a scale of capital injection had not been undertaken since 2008.

In the short term, the New York Fed had managed to calm the money markets and lowered overnight borrowing costs by injecting massive amounts of money via repurchase agreements (repos).