A sudden spike in U.S. overnight repo rates to 10% in September 2019 forced emergency Federal Reserve intervention to stabilize short-term lending markets.
Key Facts
- SOFR spike (Sept 17)
- 2.43% to 5.25% overnight; intraday high of 10%
- Liquidity injected (Sept 17)
- 75 billion USD
- Fed intervention duration
- September 17, 2019 to June 2020
- FOMC action (Sept 19)
- Lowered interest paid on bank reserves
- Markets stabilized
- September 20, 2019
By the Numbers
Location
Cause → Event → Consequence
On September 16, 2019, two simultaneous events drained cash from the financial system: the deadline for quarterly corporate tax payments and the settlement of newly issued Treasury securities. These pressures, combined with a declining level of bank reserves, created a temporary but acute shortage of available liquidity in overnight lending markets.
On September 17, 2019, the U.S. overnight repurchase agreement market experienced a sudden rate spike. The SOFR jumped from 2.43% to 5.25%, with intraday rates reaching 10%. The Effective Federal Funds Rate also moved above its Federal Reserve target range, signaling stress across both secured and unsecured short-term interbank lending.
The Federal Reserve Bank of New York conducted emergency repo operations, injecting $75 billion on September 17 and continuing daily injections through the week. The Federal Open Market Committee also cut interest on reserves on September 19. By September 20, rates had stabilized, and the Fed continued regular liquidity support in the repo market until June 2020.