Repo rate hits 7.25% on year-end volatility

US Treasury auction may have caused fireworks in the repo market

Robert Mackenzie Smith
02 Jan 2019

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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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