CME: Why Wall Street Should Watch Special U.S. Repo Market

Dynamic market changes and positioning have impacted the repo market for U.S. Treasuries.

Over recent weeks and months, the markets have largely focused on inflation, the debt ceiling debate, and potential changes in FOMC policy. This seems to have built up a short base in certain parts of the treasury coupon curve that is causing dislocations. Interestingly, the Federal Reserve Bank of New York has become more active in the market by lending specific securities.

The connection between the Treasury market, repo, and market participants is more important than ever across a range of trading products. This includes the Secured Overnight Financing Rate (SOFR), the successor to LIBOR, and is unpinned by almost a trillion dollars of repo transactions.

Understanding some of these technical drivers of repo specials can be beneficial.

The full article is available at

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