New BNY Mellon Repo Index
Dow Jones Business News writes, "BNY Mellon Unveils Repo Indexes." The article says, "Bank of New York Mellon Corp. has introduced a set of indexes tracking U.S. interest rates on certain short-term loans known as repurchase agreements, in the latest move to shed light on an obscure corner of the shadow banking system. Repurchase agreements, or repos, are a roughly $2.6 trillion market in which different types of lenders temporarily exchange cash for bonds, providing a critical source of funding for Wall Street securities dealers. They are often caught under the "shadow banking" moniker because the market involves loans made by nonbanks such as money-market funds. The three indexes -- for repos backed by high-quality collateral in the U.S. Treasury, agency and mortgage bond markets -- were unveiled by BNY earlier this month on its website, a spokesman said, after the company initially disclosed the index project in November last year." The Dow Jones piece adds, "Aggregated, publicly disseminated rates in the repo markets are few and far between. The Fed's repo facility, known as the overnight reverse repo program, offers a fixed daily rate of 0.05% under a program in which the New York Fed takes in loans in exchange for Treasury bonds as collateral.... To collect information on repo rates today, lenders in the $2.7 trillion money-market fund industry sometimes call around repo desks to compare quotes from as many as 20 different market participants before deciding how to invest their cash. The BNY rate that is being published daily is a U.S. dollar-weighted average of newly minted, overnight repo trades submitted into BNY's systems, including trades involving the Fed's reverse repo facility. As of Tuesday, the BNY tri-party aggregated repo rate for overnight trades backed by Treasurys was 0.05254%, just above the Fed's reverse repo rate of 0.05%." For more information, visit CME Group's "BNY Mellon Treasury Tri-Party Repo Index" page. In other news, Reuters writes, "U.S. Repo Rate Jumps to Highest in 3 Months," which says, "A key borrowing cost for Wall Street dealers jumped on Wednesday to its highest level in three months as cash investors reduced their lending at the end of the quarter... In the $5 trillion repo market, Wall Street dealers borrow from money market funds and other investors with Treasuries and other securities as collateral to fund their trades. At quarter-end, investors tend to scale back their repo exposure to conserve cash. Instead of repos, they put money into near risk-free Treasury bills, and fixed-rate reverse repurchase agreements offered by the Federal Reserve. On Wednesday, the Fed awarded $150 billion of two-day fixed-rate reverse repos to 70 bidders at an interest rate of 0.07 percent after it allotted $100 billion in seven-day reverse RRPs last week."
