February 2017

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The US repo market is central to the provision of liquidity across multiple asset classes. As a result, disruption in this market fans out in ways that impact a wide number of financial investors. Recent quarter ends have shown rate spikes as dealers work to ensure enough cash and High Quality Liquid Assets on their balance sheets. But December 2016 was different, indicating a new direction for this market going forward.

In this Investor Focus report, we provide a statistical evaluation of the US repo market in December 2016 across US Treasuries, corporate bonds and S&P 500 equities. We use both public and private data sets for our analysis. The result is a greater understanding of not only the repo market but liquidity and balance sheet trends for the US and global markets.

This report should be read by investors in the repo markets across money funds, securities lending and government-sponsored enterprises, and by investors in fixed income and equities. It may also be helpful to dealers and service providers looking to understand future dynamics in the repo marketplace.

This report is 15 pages with six exhibits.

■ Executive Summary

■ Structural Change in the US Repo Market

■ What Happened in December 2016
– The Impact of the Reverse Repo Facility
– December vs. September: The Big Differences

■ What Happens Next

■ About the Author

■ About Finadium


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