Wall Street Banks Warn Money Market Stress May Return, Prompt Fed Action

Multiple Wall Street banks warned that pressure in U.S. money markets may flare up again, potentially prompting faster Federal Reserve intervention to contain a fresh surge in short-term rates, the Financial Times reported on Nov. 7. Short-term funding rates stabilized this week after tensions emerged in key segments of the financial system last month. Deirdre Dunn, head of rates at Citibank and chair of the Treasury Borrowing Advisory Committee, said she does not view this as an isolated anomaly lasting just a few days, while Scott Skyrm, executive vice president at Curvature Securities, noted funding stress is likely to return at least by month-end and year-end. Meghan Swiber, rates strategist at Bank of America, said aggressive Treasury bill issuance at historically high levels could exhaust traditional investor demand, suggesting the Fed may need to step in as a buyer.