"U.S. repo rates elevated before FOMC"
Reuters writes "U.S. repo rates elevated before FOMC". It says, "A key borrowing cost for banks and bond dealers slipped on Monday, but remained at elevated levels ahead of a Federal Reserve policy meeting, which might hint at a move that could push up short-term interest rates. What banks and dealers charge each other on overnight loans secured by U.S. Treasuries fell to about 19 basis points from 21 basis points on Friday. This interest rate on overnight repurchase agreements (repos) is roughly 10 basis points above the recent low seen 2-1/2 weeks ago when investors scrambled for Treasuries in this corner of the funding market worth $1.6 trillion. Since then, the overnight repo rate had risen on a combination of factors including fading expectations that the European Central Bank will inject more cheap funds into the region's banking system and a modest increase in weekly Treasury bill supply since mid-February.... Last week, a Wall Street Journal article added upward pressure on dollar repo rates. It said should the Fed decide to buy more bonds to boost growth, it could borrow back the money it used to buy those bonds for short periods of time at low interest rates. By engaging in "reverse repos," the Fed would take that money out of circulation, or "sterilize" it. Such a Fed move could reduce the amount of the cash in the financial system, resulting in banks and dealers bidding more aggressively for short-term funds."
