Scott E.D. Skyrm, repo specialist and author of an upcoming book on MF Global, presented an interesting repo chart on his blog this week:
As the chart shows, so-called GC repo rates are once again trading below the Fed Funds rate. Read more
A hat tip to John Kemp at Reuters for drawing our attention to this from the US Treasury on Friday:
WASHINGTON – The Treasury is calling for Large Position Reports from those entities whose reportable positions in the 0-3/4% Treasury Notes of September 2013 equaled or exceeded $2 billion as of close of business Wednesday, December 8, 2010. This call for Large Position Reports is a test. Entities with reportable positions in this note equal to or exceeding the $2 billion threshold must report these positions to the Federal Reserve Bank of New York.
Libor has, in many ways, already been disowned by the industry. But now the discussion of its inadequacies has entered the mainstream, thanks to the fines recently levied on Barclays for manipulating the rate, and its drawing unwelcome attention to the fact that it’s still used to determine payments on hundreds of trillions of financial products.
But one of the other key points to emerge is in its chapter on the “limits of monetary policy”. There is, it appears, a marked admission that central banks may be losing control. Read more
Or, what to do when your primary funding benchmark is in crisis.
The search is on in money markets for an alternative to Libor, amid doubts about the rate’s reflection of banks’ actual borrowing costs. So it seems a fortuitious coincidence that April this year will see a boost to the recently launched Repo Overnight Index Average (RONIA) as one such alternative. Ronia’s a secured rate. Unlike Libor, which emerges from a survey that asks banks “At what rate could you borrow funds etc..” Ronia is also derived from actual transactions. Read more
Oh dear. So much for the big Draghi LTRO helping out the Eurozone collateral crunch.
According to Icap’s latest repo makret report — and remember they operate the dominant electronic repo platform in Europe, Brokertec — the collateral crunch hasn’t eased at all. Read more
Bank of America Merrill Lynch’s global rates teams has interesting note out on Friday regarding Chinese repo rates.
As they point out, the seven-day rate currently implies something of a liquidity crunch in the market. While much of this is naturally down to the routine dash for cash ahead of the Chinese New Year, the rate rise has, nevertheless, been pretty significant and sharp when compared to previous years: Read more
Back in October 2008, when the ECB first announced its list of extraordinary liquidity measures to help combat the financial crisis, most eyes were drawn to such things as widening eligibility of collateral and the announcement of long-term refinancing operations (LTROs) .
But there was one other very significant change, which *perhaps* went under the radar for most people. Read more
These two charts, courtesy of Icap’s Euro Repo Weekly, tell it all:
First we had the ‘credit crunch’. Now some warn what Europe might in fact be experiencing is better described as a ‘collateral crunch’.
Ever since banks turned to the secured collateral markets known as ‘repo’ for their funding needs, especially over longer durations, quality collateral has become the most sought over security in town. So much so, in fact, that some quality collateral is hardly circulating. Getting your hands on it, meanwhile, can make the difference between being able to fund in the public market or having to turn to the ECB. Read more
In order to be effective, a central bank must act as a monopoly. It, just like Sauron, must control all. That’s the point.
All central banks thus routinely corner markets. If they didn’t, they would compromise their own position. Read more
Something strange is up in the world of ‘General Collateral’. And since eurozone funding markets are increasingly dependent on collateralised rather than unsecured loans, these are important developments that could be influencing rates elsewhere.
Nothing tells the story better than these charts, courtesy of Icap — a key repo market broker. What they pinpoint is a seemingly diverging attitude towards the various bond markets that make up so-called general collateral (GC) in the Eurozone, as far back as July this year: Read more