The New York Federal Reserve’s Treasury Market Practices Group (TMPG) published its June meeting minutes, in which the members highlighted the May 21st Bloomberg Terminal outage; how the new best practice recommendation for the US Treasury repo risk management is being received and implemented in the market; the US economic outlook; member expectations for the path of the policy rate; Treasury market outlook; as well as money market conditions and standing repo facility (SRF) expectations.
“Members commented that the market response to the guidance has been positive, given both the emphasis on a broad approach to enhancing risk management standards and the lengthy implementation timeline,” according to the minutes. Out reach to implement the best practices guidelines included a presentation given to the Bank of Canada’s Collateral Infrastructure and Market Practices Advisory Group.
In the discussion on month-end and quarter-end conditions in funding markets, members agreed that the Treasury repo market has been functioning smoothly in recent weeks, and they expect softness in funding markets to persist for most of the summer. Members then discussed the addition of daily morning SRF operations.
While members broadly view the additional SRF operations to be beneficial for funding markets, they expected that the SRF was unlikely to be used over the June quarter-end, given ample liquidity in the system. Members also predicted limited SRF usage in September, but noted some potential for use, although not sustained, in December, as pressure in funding markets is expected to increase.