At Any Rate US Rates: An uneventful year-end for repo
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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.
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Calm Year-End Repo Market
- Several factors contributed to a calmer repo market at year-end 2024.
- Lower net Treasury supply, proactive market participants, and sponsor repo availability all played a role.
Overnight RRP Performance
- The overnight Reverse Repurchase Agreement (RRP) facility performed as expected, with balances nearly doubling on December 31st.
- Balances decreased afterward, but the debt ceiling may cause them to rise again.
Debt Ceiling Impact on RRP
- The debt ceiling can influence the overnight RRP facility by impacting Treasury's cash management.
- Extraordinary measures and TGA drawdowns can shift cash into bank reserves or the overnight RRP.