Michael Cowan: The Banking System Just Hit the Red Button

Last Friday, as markets hummed towards their close, a quiet but deeply unsettling signal emerged from the heart of the global banking system. It wasn’t a blaring siren, but to those who understand its language, it was a critical distress call, echoing a dangerous scenario we last saw in 2019. The source? The often-overlooked, yet profoundly crucial, repo market. This recent spike in repurchase agreements – a staggering $30 billion – isn’t just a number; it’s a tremor beneath the surface, indicative of underlying financial instability that demands our attention. To understand the gravity of this signal, let’s simplify what the repo market…