Dollar Funding Markets Are Showing Signs of a ‘Muted’ Year-End
- Indicators including basis swaps, repo showing few strains
- Demand for short-term assets continues to outweigh supply
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US dollar funding markets are looking sanguine about year end, especially as demand continues to outstrip supply, according to JPMorgan Chase & Co.
Trading of overnight general collateral repurchase agreements for the last trading day of the year is steady, while in times of turmoil activity would surge as banks pare their balance sheets. Cross-currency basis swaps — the cost of swapping euros and yen for dollars, the world’s preferred currency in times of stress — are stable, after widening out at the end of September. At the same time the gap between financial commercial paper and overnight index swaps has only widened slightly.