Bonds
Banks Likely ‘End Game’ for Repo Market as Treasury Supply Grows
- At least $200 billion of more financing in a few years: Citi
- Overnight rates rising amid dealer balance-sheet constraints
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Banks will have a bigger footprint in the market for repurchase agreements as US Treasury coupon bond issuance swells and demand for financing grows in the coming years.
The supply of new Treasury coupons is expected to increase by over $3 trillion in the next two years, which means Wall Street will need to find another $200 billion to $400 billion of additional repo, according to Citigroup Inc. strategist Jason Williams, in a note dated Aug. 23.