BNY Mellon: market behind on T+1, repo prices could be impacted

BNY Mellon analysis of its US custody base shows that roughly a third of trades settled by DTCC may face issues in preparation for the settlement cycle reduction to trade date plus one day. The data show that about 25% of client transactions need to adjust their workflows to meet the new settlement cutoffs. Another roughly 9% would need significant operating model changes by late May to meet the new deadlines. Only two-thirds of client trades currently meet the future deadlines.

“Settlement failures could impact the entire trade lifecycle, affecting agent lending, cash management, repo pricing and bank balance sheets. Rather than increasing credit exposure to banks, clients may have to borrow in overnight repos to cover any residual balances on their books and settle in the T+1 timeframe, lowering repo availability and driving up costs. Given all this, market participants might want to prioritize preparations for the new standard,” BNY Mellon wrote in the Alta Report.

The report also covers a number of market dynamics, including rate cut expectations, outlook for USD strength, as well as UST and UST repo clearing, among other topics.

Read the full report


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