Repo netting curbs threaten government bonds, say dealers

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Banks fear it will be impossible for them to use a safe harbour designed to protect repurchase agreements from the worst impacts of the Basel Committee on Banking Supervision's new leverage ratio. That could drive up transaction costs and hurt the liquidity of government bond markets, some claim.

The industry initially welcomed revisions to the ratio, finalised on January 12, because it allows the netting of repos and reverse repos with the same counterparty under certain circumstances –

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