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As time passed on Washington’s debt ceiling deadlock, Wall Street companies placed a record $ 1.605 trillion in cash overnight into the popular Reserve reverse repurchase program. federal.
Congress approved a temporary funding measure Thursday afternoon to extend government spending until Dec.3, while avoiding a partial shutdown hours before midnight, but the federal debt ceiling has yet to be lifted .
See: What happens if the United States defaults on its debt?
As the drama unfolded on Capitol Hill, a total of 92 companies participated in the Fed’s reverse repurchase transaction on Thursday. The program, run by the Federal Reserve Bank of New York, gives banks, government-sponsored companies and some of the world’s largest investment firms a short-term haven to park money, while earning 5 basis points overnight.
Earlier in September, the Fed doubled the cap that each counterparty can pledge on the overnight facility to $ 160 billion each. The program has grown in popularity in recent months as billions of dollars in fiscal and monetary stimulus rolls through the U.S. economy and financial markets.
The latest rise in demand was not unexpected, however, with some Wall Street analysts predicting the rise in early August, due to the tightening treasury market, the generally volatile end-of-year period and resentment. of Washington with regard to public spending.
US stocks sold sharply on Thursday, the last day of September and of the quarter, with the Dow Jones Industrial Average DJIA,
losing 456 points, or 1.6%, while recording its worst monthly loss since October 2020.
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