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Illustration: Aïda Amer/Axios

Today's interest rates decision in the face of global economic turmoil but strong U.S. data is going to be dicey enough — but Fed chair Jerome Powell and the Federal Open Market Committee (FOMC) may also need to announce a comprehensive bond-buying program on top of that.

Driving the news: Following an emergency $53 billion repurchase agreement operation on Tuesday, the New York Fed announced it would hold another repo auction today for as much as $75 billion.

  • Interest rates jumped as high as 9% Tuesday, well above 2.25%, which is the top of the Fed funds rate that should guide the market.
  • The New York Fed was forced to intervene, something it hasn't done since 2008.

Why it matters: Market participants worry this is a sign there's a widespread lack of liquidity in the repo market, which is used by large, systemically important financial institutions to quickly borrow cash in exchange for securities like U.S. Treasuries.

  • A lack of liquidity starts to break markets down as the trading and pricing of assets becomes increasingly difficult. This happened to the repo market during the 2008 financial crisis.

The big picture: The Fed could indicate it plans to stabilize the level of reserves at today's FOMC meeting, meaning it increases its bond purchases, a process that "will look, walk and talk like quantitative easing," says Gennadiy Goldberg, senior U.S. rates strategist at TD Securities, a primary dealer that does business directly with the Fed.

What they're saying: Tuesday was the fourth time in the past year the repo rate has jumped to abnormally high levels, following episodes in December, April and on Monday.

  • Analysts say the culprit is a scarcity of bank reserves, which have been declining since 2014 and are expected to fall further.
  • "None of this was a shocker to anyone, so the question is why did the market panic," Goldberg tells Axios. "You’ve had enough of these repo events to suggest that we are getting to the point where there isn’t enough liquidity in the system."

What's next: Analysts at Bank of America Merrill Lynch see "substantial risks" that the Fed announces outright bond purchases to stabilize the repo market. That could mean $150 billion of additional Treasury purchases, bringing the total to $400 billion in the next year.

  • "Such a statement would imply that permanent balance sheet growth and outright purchases are necessary," BAML rates strategists said in a note to clients.

Go deeper

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Pfizer coronavirus vaccine safe, effective in children, company says

Photo by Mario Tama/Getty Images

Pfizer and BioNTech's coronavirus vaccine is safe and effective in children ages 5 to 11, albeit at a lower dose than adults receive, the companies said in a press release announcing results from a pediatric trial.

Why it matters: The trial results are a much-needed source of hope for families with elementary school-aged children, who currently aren't eligible for a vaccine.

The pandemic made our workweeks longer

Illustration: Annelise Capossela/Axios

The average American's workweek has gotten 10% longer during the pandemic, according to a new Microsoft study published in Nature Human Behaviour.

Why it matters: These longer hours are a key part of the pandemic-induced crisis of burnout at U.S. firms — and workers are quitting in droves.

Mike Allen, author of AM
1 hour ago - Economy & Business

Airbnb CEO Brian Chesky to herald "travel revolution"

Expand chart
Data: TSA. Chart: Jared Whalen/Axios

Airbnb CEO Brian Chesky will argue this week that the world is undergoing a "travel revolution," in which some parts of the industry stay shrunk but the sector ultimately comes back "bigger than ever."

Why it matters: Chesky, who faced the abyss when the world shut down last year, foresees a significant shift in how people move around, with more intentional gatherings of family, friends and colleagues — even if routine business travel is never what it once was.