Fed Wins Year-End Repo Battle, But War to Control Rates Drags On

• The Federal  Reserve may have succeeded in thwarting major year-end turmoil in funding markets, but 2020 is likely to bring a whole new set of concerns.
• The U.S. central bank has been injecting liquidity into markets through repurchase-agreement operations since mid- September in a bid to keep control of short-end rates. 
• Earlier this month the Fed ramped up its offerings to help smooth the market’s path into January. It has also been bolstering system reserves through Treasury bill purchases.
• The results of the most recent repo actions, which were undersubscribed, suggest that there is now ample funding for the year-end turn. And while the rate on overnight general collateral repurchase agreements was slightly elevated on Tuesday morning, the market is not witnessing the kind of spike seen in September -- when overnight repo rates surged to 10% from around 2%.

 (Source: Bloomberg)