Breaking market norms, tri-party repo rates plunge for fringe collateral

Yields hierarchy upended as cost of repo-ing equities and other volatile securities falls over a percentage point below UST repos

Tri-party rates for US repos backed by fringe collateral – such as private-label asset-backed securities and non-corporate debt – have declined sharply since late July, decoupling from the general cost of secured borrowing with no immediate or obvious cause.

Data published by the Office of Financial Research (OFR) shows that the average daily rate for tri-party repos collateralised by assets other than US Treasuries, agency securities, or corporate debt dropped suddenly from 5.49% on July 19, to