US lending debacle reinforces lessons of the credit crunch

The Fed has been forced to provide $100bn of emergency liquidity, but we are not yet facing another 2008

The US repurchase or repo market has experienced significant difficulty in recent weeks. This market involves overnight lending that is secured on collateral, normally government bonds.

Rates of interest for overnight borrowing spiked at 10 per cent at one point, which is incredibly high when you consider that the US Federal Reserve funds rate is only 2 per cent. The Fed had to step in and provide nearly $100 billion of emergency liquidity ...