JPMorgan Sees Surge in Demand for Equity-Backed Repos Persisting
This article is for subscribers only.
A rise in funding costs is spilling into the market for repurchase agreements backed by equities, a phenomenon that’s unlikely to abate, according to JPMorgan Chase & Co.
The amount of equity collateral that dealers need to finance the repo market has swelled, driven by the benchmark S&P 500 Index rallying to new highs and robust investor demand for leverage equity exposure, said strategists Teresa Ho, Pankaj Vohra and Bram Kaplan in a note on Wednesday. As a result, the total amount of primary-dealer equity financing in repos has hit the highest level since April 2013, according to the most recent Federal Reserve Bank of New York data.