Repo is a short loan backed by collateral, usually a Treasury.

One side borrows cash overnight and posts a bond as security; the other lends and holds the bond.

Trillions of dollars in repo fund the market every single night.

At the end of September 2025, repo rates jumped sharply.

The main repo benchmark, SOFR, spiked above the Fed's target as cash grew scarce.

Banks tapped the Fed's standing repo facility for its largest amount since it began, about $18.5 billion in a day.

The New York Fed stood ready to add up to $100 billion to calm the market.

It was a funding squeeze at quarter-end, not a credit panic.

A firm needs cash for the night and holds Treasuries it does not want to sell.

It sells the bond today and agrees to buy it back tomorrow at a slightly higher price.

That small price gap is the interest on the loan.

The lender holds the bond as safety, so the loan is low-risk.

This lets banks, funds, and dealers fund huge positions cheaply overnight.

The whole market rolls over, night after night, on this quiet machine.

The first stress point is scarce cash. If lenders pull back, rates spike, as they did at quarter-end.

The second is collateral. A shortage of Treasuries to pledge can jam the plumbing.

The third is quarter-end itself. Banks tidy their books, so cash gets scarce on those dates.

The deepest memory is September 2019, when repo rates spiked and the Fed had to intervene.

Repo is the sturdy backbone of short-term funding, and the collateral makes it safe.

The Fed's standing facility now stands ready to lend, a real improvement that deserves credit.

What can break is smoothness when reserves run low, letting rates lurch at stress points.

You can watch the gauges. The New York Fed posts SOFR and standing facility use every day.

A jump in the facility's use shows the plumbing is under pressure.

Repo is the overnight loan market that funds Wall Street, safe but sensitive to scarce cash.

September's spike showed the strain as reserves thin, though the Fed's backstop worked.

The next test is the next quarter-end. Watch SOFR and use of the Fed's standing repo facility.