We’re not sure how significant this is, but the US repo curve appears to have inverted.
Looking at the historical data it seems not for the first time in the last year either.
Here’s the chart:
Here’s some comment from Marc Ostwald, at Monument Securities:
a) The overall shift in the repo curve is at best marginal, particularly in the May-July comparison.
b) Indeed one can argue the current structure of the curve is better aligned with the money curve than it was in May.
c) In the current environment, where central banks (specifically the Fed) are not pumping fresh liquidity into the money market, and thus distorting any form of lending rate much lower, short security positions are much more vulnerable, and the premium placed by ‘repo lenders’ to help cover those shorts that much higher.
So overall I think it is symptomatic of decreasing levels of liquidity and by extension lower volumes / turnover, which is unsurprising in a more hostile regulatory environment, particularly with regard to short-term risk taking (i.e. very different to risk, or rather yield, appetite and / or chasing).
So there you go.
Related links:
A humpy US curve - FT Alphaville