Repo rate hits 7.25% on year-end volatility

US Treasury issuance on December 31 said to have fuelled last-minute dash for cash

US Treasury
US Treasury auction may have caused fireworks in the repo market

The cost of borrowing overnight cash in the US Treasury repo market popped 147% from the open on December 31 to an intraday high of 7.25% – an “extraordinary” move that some blame on the US government’s decision to issue $51 billion of debt on the last trading day of the year.

The general collateral (GC) repo rate closed at 4%, up 107 basis points on the day. “Forward rates a few days ahead of the turn were indicating 285bp, but on December 31 the markets opened around 3% and peaked at 7.25%,”

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