Repo Fretting Shifts to Treasuries as Market Faces Next Test
- Corporate tax payments, Treasury auctions to revive conditions
- Risk shifted from banks to hedge funds, independent brokers
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Flare-ups in the repo market could still cause worries across the global banking system, more than two months after chaos subsided in this vital corner of finance.
Of particular concern: U.S. Treasuries, the world’s biggest bond market and the place where the federal government funds its escalating deficit. If repo rates become jumpy again -- and many are girding for that to happen in the middle and end of this month -- some of those leveraged investors may have to unwind Treasury holdings, potentially increasing the U.S. government’s interest costs at a time of record borrowing.