Dr. Darrell Duffie on Liquidity Strains at Year-End/Quarter-End and When Fed Reserves Will No Longer Be Ample

With the end of year approaching and SOFR/IOR spreads widening, Darrell Duffie, renowned and prolific monetary scholar, joins Monetary Matters to share his views on why liquidity strains often appear at quarter- and year-end. Duffie explains his work on the September 2019 repo blowout and shares his findings that timing of bank payments is a better predictor of SOFR/IOR stress than the SOFR/IOR spread itself. Duffie also shares his views on debt-to-GDP levels, the theory that the Treasury has engaged in “stealth QE,” and the impact of SOFR transition on bank funding costs. Recorded on December 27, 2024. Duffie Piece On Reserves Discussed For Most Of Interview (“Reserves Were Not So Ample After All”): https://www.newyorkfed.org/research/staff_reports/sr974 Duffie Piece on SOFR vs. LIBOR impact on bank debt-overhang cost (discussed at end, “Bank Funding Risk, Reference Rates, and Credit Supply”): https://www.newyorkfed.org/research/staff_reports/sr1042 Darrell Duffie’s website https://www.darrellduffie.com/ Follow Monetary Matters on: Apple Podcast https://rb.gy/s5qfyh Spotify https://rb.gy/x56dx5 YouTube https://rb.gy/dpwxez Follow Jack Farley on Twitter https://x.com/JackFarley96