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Traders Stockpiling Bonds Are Causing a Great Collateral Squeeze

  • Flight-to-quality amid Ukraine war increases demand for bonds
  • Failed Treasury trades rise, as gilt dealers use repo facility
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Dealers and investors in Europe and the U.S. are rushing to stockpile the safest assets as collateral -- gumming up the financial plumbing of the biggest bond markets with echoes of disruptions wrought by the 2020 pandemic.

As Russia’s invasion of Ukraine spurred a disruptive flight-to-quality, Treasury traders failed to follow through with their so-called repurchase agreements by the most in almost two years.