The Federal Reserve Bank of New York posted another update on Tri-Party repo, "The Cost and Duration of Excess Funding Capacity in Tri-Party Repo." (See our Oct. 3 News, "Federated'​s Cunningham on Fed in December; NY Fed on Tri-​Party Repo.") The Liberty Street Economics piece says, "In a previous post, we showed that dealers sometimes enter into tri-party repo contracts to acquire excess funding capacity, and that this strategy is most prevalent for the agency mortgage-backed securities (MBS) and equity asset classes. In this post, we examine the maturity of the repos used to pursue this strategy and estimate the associated costs. We find that repos that generate excess funding capacity for equities and corporate debt have longer maturities than the average repo involving either of these asset classes. Furthermore, the premiums dealers pay to maintain excess funding capacity can be substantial, particularly for equities.... Dealers acquire excess funding capacity to be able to cope with unanticipated funding demands and shocks in the future. But how far into the future do dealers secure excess funding? We answer this question using confidential, daily tri-party repo market data covering March 2017. We divide repos into two categories: those that generate excess funding capacity ("excess") and those that don't ("no excess"). In the table below, `we compare the cumulative maturity distributions for these two groups of repos, looking across three asset classes."

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