The Repo Market
The invisible overnight lending market that keeps Wall Street liquid — and what happens when it freezes.
Banks need short-term cash constantly. They can't access their bonds or securities instantly to cover a liability due tomorrow. So they repo. A bank sells a security for cash today, promising to buy it back tomorrow at a slightly higher price. The difference is interest. The next morning, the security returns, the cash gets repaid. The repo market is financial plumbing. $4 trillion trade daily. Overnight lending allows banks to manage cash flow without maintaining massive reserves. When the repo market works, the pipes flow silently. Then September 2019 happened. Repo rates spiked. Lenders got spooked. The market froze. Banks couldn't borrow overnight.
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