Turbulent US Funding Market Forewarns of a Volatile End to 2024

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The latest heightened liquidity pressures in the US funding market have some on Wall Street nervous about even greater challenges in the final month of the year.

Alexandra Harris and Carter JohnsonArt Hogan, chief market strategist of B. Riley Wealth Management, joins BNN Bloomberg and talks about the U.S. job creation roared higher in September.

“Year-end is now a bigger issue given the volatility” at quarter-end, said Peter Nowicki, head of repo trading at Wedbush Securities Inc. Funding markets will also feel pressure from global systemically important banks, or GSIBs. At year-end, a snapshot of GSIBs’ exposures is taken to determine whether their capital requirements will increase for the following full calendar year. So when institutions are tidying up their balance sheets, it’s easier to trim repo activity, according to Jan Nevruzi, a US rates strategist at TD Securities, adding that companies are less likely to transact in “low margin businesses.

“The bigger problem is the dislocation of cash lenders and borrowers,” said Nowicki. “It seems if the lenders don’t lend, we could get a spike.”

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