Normally that is a dull part of the financial system’s plumbing, but these aren’t normal times for many banks. Just as higher interest rates have put pressure on banks to pay savers more, there has been a systemwide shrinking of deposits. Another has been the Fed’s overnight reverse repurchase agreement facility, or reverse repos, which absorbs cash from investors such as money-market funds. “If you’re a bank, you don’t care why money-market rates are rising, but that they are rising and you need to compete with them," he said. It will be a relief to see a debt-ceiling deal struck, but it will hardly solve all of the market’s problems.

Source: Wall Street Journal May 24, 2023 17:19 UTC