Fed paper: The Dynamics of the U.S. Overnight Triparty Repo Market

The overnight segment of the triparty repurchase agreement (repo) market plays a pivotal role in the normal functioning of the U.S. financial system by acting as an important source of secured short-term funding and supporting the liquidity of key fixed income markets, including U.S. Treasury and agency securities. This over-the-counter market accounts for over $1 trillion in daily transactions and provides a unique venue in which a diverse set of market participants invest their cash as well as obtain short-term funding. Despite the importance of the overnight segment, little analysis has been undertaken about its intraday trading and pricing. Using supervisory transaction-level data, this note aims to fill this gap by providing an overview of the pricing and clearing process of this segment. Besides highlighting the relevance of the overnight segment within the greater U.S. repo market, we present novel facts about how this segment behaves, emphasizing the role that participants, collateral, and trading relationships play in its pricing and clearing process.

The remainder of this note is organized as follows. Section I describes the institutional background of the U.S. repo market with a focus on the triparty repo segment. Section II describes our data. Sections III and IV describe the triparty segment’s major participants as well as the types of collateral frequently used in overnight triparty repos. Section V documents several stylized facts about the intraday dynamics of the overnight segment of the triparty repo market. Section VI concludes.

The full note is available at https://www.federalreserve.gov/econres/notes/feds-notes/the-dynamics-of-the-us-overnight-triparty-repo-market-20210802.htm

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