Treasury Repo Trading Debate Spurs Big Wagers on Lending Rates

A discussion around the prospect of US Treasury investing its excess cash into short-term money markets unleashed a flurry of wagers betting on spread movements between overnight lending rates.

Details released on Wednesday by the Treasury Borrowing Advisory Committee showed a “healthy debate” on the potential of investing excess funds held by the department into the overnight repurchase market. While the advisory body said benefits from the plan would be marginal, traders in the derivatives market piled on trades that would benefit from easing conditions in funding markets.