At Any Rate cover image

At Any Rate

US Rates: An uneventful year-end for repo

Jan 10, 2025
Strategists dive into the surprising calm in year-end repo markets, revealing how increased bank participation and strategic funding improved liquidity. They explore recent trends, including the impact of the overnight reverse repurchase agreement and the debt ceiling on cash balances. Discussions on quantitative tightening and what it means for future liquidity keep the conversation lively, painting a picture of an uneventful yet intriguing period for secured funding markets.
09:35

Podcast summary created with Snipd AI

Quick takeaways

  • The calmer year-end for repo markets was driven by subdued treasury supply and proactive liquidity management among participants.
  • The doubling of overnight reverse repurchase agreement balances by year-end indicates shifting liquidity preferences amid concerns over the impending debt ceiling.

Deep dives

Calm Year-End in Secured Funding Markets

The secured funding markets experienced a calmer year-end than many market participants had anticipated, primarily due to subdued net treasury supply. On December 31st, nearly $120 billion in treasury coupon settlements was largely offset by around $80 to $90 billion in treasury bill paydowns, resulting in only $34 billion in net treasury supply. Additionally, market participants adopted a more cautious approach, proactively addressing their funding needs ahead of year-end, which helped to avoid last-minute liquidity crises. The increased use of FICC sponsored repo, which surpassed $2 trillion in the final week of 2024, further highlighted this stability in the market compared to previous quarter ends.

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