Treasury Repo Rates Surge to 2012 High on Quarter-End Moves

Tue, March 31, 2015


The rate for borrowing and lending Treasuries surged as banks reined in collateral lending to shore up balance sheets and those needing financing at quarter-end were forced to pay higher prices.

The peak level Tuesday for financing Treasuries overnight in the repurchase-agreement market, relative to unsecured lending rates, reached the widest since July 2009, according to Barclays Plc. The average cost for this funding, known as general collateral repo, averaged its highest in the morning trading since October 2012, according to ICAP Plc.

...The allotment at the central bank’s overnight fixed-rate reverse-repurchase program Tuesday morning was $202.2 billion at a rate of 0.05 percent. The Fed had previously announced that its one-day agreements would take place in the morning, as opposed to the typical afternoon timing.

...“You had complications also because the Fed was doing its overnight reverse repos early in the morning on quarter-end,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “There was the perception that people had to pre-emptively lock-in early in the morning as much funding as they might possibly need before the Fed. So market participants that needed funding decided that they had to take it at any price.”