From Japan to Us mortgages: how the Fed saved financial markets
What really happened in the Us repo market in mid September? On Il Sole 24 Ore the hidden story of a sudden shock, that starts in Japan and goes to the Us mortgage market
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What really happened in mid September, when the Repo market in Us was shaken by a severe crisis that forced the Federal Reserve to inject huge amounts of liquidity? And why the Fed had to act so quicky, increasing its balance sheet by 260 billions in just two months? Who had to be saved? And what is the link between Japanese farmers and the balance in the global financial markets?
Behind the scenes, Il Sole 24 Ore found out some hidden explanations that come from Japan. And, more precisely, from a Japanese bank. But Il Sole 24 Ore found out also who were the entities to save: all the financial vehicles in the US that use the Repo market to finance themself, but don’t have access to the Federal Reserve emergency lines.
Without the quick action by the Fed, some of these vehicle would have been in trouble. That’s why the Fed had to act so quicly: because behind these vehicles lies the sustainability of the Us morgage market.
Read the full English version of the story on 24+.