Reuters writes "End of QE2 could ease repo collateral squeeze". The piece says, "Conditions in the repurchase market may remain rough until the Federal Reserve ends its Treasury purchasing program at the end of June, analysts said on Wednesday. The rates on general collateral in the repo market have been stunningly low since April 1, when a change in insurance assessment methods for commercial banks forced a flood of cash into the short-term financing markets, sucking up the collateral that comprises the other side of a repurchase agreement. Rates on the securities repo that traders use as general collateral fell to single basis-point ranges and even turned negative in cases where a particular type of security came into greater demand." The article quotes Ward McCarthy of Jefferies & Co., "The issue is what's part of the floating supply in the market. The Fed lending can help ease squeeze types of situations but that's an augment to a market that's just dry." See also, Bloomberg's "FDIC's Bair Says U.S. Money Funds 'Highly Unstable in a Crisis'".

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