Repo crisis becomes machiavellian opportunity for some investors

US money-market interest rates surged Tuesday as cash reserves in the banking system remained out of balance with the volume of securities on dealer balance sheets

“Never waste the opportunity offered by a good crisis,” is a quote first attributed to the Italian Renaissance writer Niccolo Machiavelli and repeated by politicians the world over ever since.

It also became a main theme for fund managers this week as chaos roiled money markets, sending short-term interest rates surging. Traders rushed to profit from the dislocations, knowing that the Federal Reserve would likely step in quickly to calm the market for repurchase-agreement transactions that was ground zero for the turmoil.

In London, BlueBay Asset Management’s Kaspar Hense said the $65 billion firm profited from the widening in a key forward