Money market rates doubled overnight, forcing interventions by central banks overseas. and the Fed joined suit this morning. From Bloomberg:
The Federal Reserve added $50 billion in temporary reserves to the banking system when it arranged overnight repurchase agreements, or repos.
The rate for overnight loans between banks had opened at 3.75 percent, above the Federal Reserve’s targetrate, as American International Group Inc.’s credit rating cut increased banks’ reluctance to lend. The rate dropped to the central bank’s target of 2 percent after the cash injection.
The Fed added $70 billion in reserves to the banking system yesterday, the most since the September 2001 terrorist attacks, to bring borrowing costs down after the bankruptcy of Leman Brothers Holdings Inc. triggered a hoarding of cash. Funds opened at 3.5 percent yesterday.
“From a pure reserve perspective, the desk might not need to arrange any repos at all today,” Wrightson ICAP analysts wrote in a note. “From a dealer-funding perspective, another round of large morning repos may have a calming effect.”