Fed needs further rate cuts to address US funding squeeze: Credit Suisse

Pressure caused by this "supermassive black hole" would seep into the foreign exchange forward, cross-currency basis and Libor-OIS markets, according to the note

The Federal Reserve needs to cut rates further to address a looming funding squeeze in US money markets being fuelled by foreign central bank demand for its reverse repurchase agreements, according to Credit Suisse Group. Usage of the foreign repo pool — where central banks invest cash with the New York Fed at rates comparable to money-market repo rates — is close to $100 billion so far this year, driven by haven flows, strategist Zoltan Pozsar wrote in a research note on Wednesday. It could hit $200 billion by year-end, exacerbating a glut in collateral caused by $800 billion in