Repo Returns By Venue

Rates

Interest rates measure the cost of funding. They can act as indicators both of short-term costs of capital for financial intermediaries and of stress in funding markets. These charts present interest rates across various short-term funding markets and types of funding.

Repo returns by venue

Mean rates on repurchase agreements by venue: GCF Repo Service, DVP Service, and tri-party repo

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The market for repurchase agreements (repo) supports short-term liquidity and price discovery by allowing financial institutions to lend or borrow cash, usually overnight, with securities as collateral. Repo venues vary on the extent to which participants know their counterparty, the extent to which they know the specific security being used as collateral, and whether their trades are cleared by a central counterparty.

The OFR collects data on three venues for repo transactions. The first is the tri-party market. In tri-party repurchase (repo) transactions, participants know their counterparty, but transact against classes of collateral, rather than specific securities. As a result, tri-party repo is used only for financing, and not for obtaining specific securities. A custodian, usually a bank, maintains post-trade processing activities such as collateral selection, payments and deliveries, custody of collateral securities, and collateral management. Borrowers in tri-party tend to be larger dealers to which cash lenders are willing to be directly exposed. The Federal Reserve has used tri-party repos on occasion to deliver liquidity to dealers in times of market stress.

The second venue is the Fixed Income Clearing Corporation's (FICC) DVP Service. This is a centrally cleared market in which participants know the specific security used as collateral for a transaction. It contains both unbrokered activity, where participants know their ultimate counterparty, and brokered activity, where participants do not know their ultimate counterparty. Because DVP Service settles on a specific-security basis, some of the activity surrounds securities that lenders want, using DVP Service to gain temporary ownership of the security. Lower-than-usual rates in DVP Service relative to other venues can indicate higher-than-usual demand for specific securities, and could signal illiquidity in the cash market for securities.

The third venue is FICC's GCF Repo Service. This is a centrally cleared market in which participants know neither the specific securities used as collateral nor their counterparty in a transaction. The venue is purely general collateral, so all activity is financing driven. Because it is counterparty-blind, it can be a popular venue for participants concerned about revealing their immediate liquidity needs.

The beginning of the series for DVP and GCF reflect the introductions of the OFR's collection of DVP data in October 2019 and of GCF data in December 2019.

Series Used

Related Charts

Repo returns by venue
Mean rates on repurchase agreements by venue: GCF Repo Service, DVP Service, and tri-party repo
 One-month rates of return in repo and Treasury markets
One-month rates of return in repo markets and yields on one-month Treasuries
 Average rates of return in centrally cleared repo markets by collateral type
Average interest rates in the GCF Repo Service and DVP Service broken out by type of collateral
Average rates of return in tri-party repo markets by collateral type
Rates of return in tri-party repo market broken out by type of collateral
 Yields on money market fund investment holdings of repos by collateral type
Dollar-weighted median yields on money market fund investment holdings of repos by collateral type
 Yields on short-maturity Treasuries
Yields on short-maturity (one year or less) Treasury securities
 Yields on long-maturity Treasuries
Yields on long-maturity (one year or more) Treasury securities
 Yields on money market fund investment holdings of repos by tenor
Dollar-weighted median yields on money market investment fund holdings of repos by tenor
 Federal Reserve Bank of New York reference rates
Levels of overnight reference rates
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Suggested Citation

Office of Financial Research, “OFR Short-term Funding Monitor,” refreshed daily, https://www.financialresearch.gov/short-term-funding-monitor/ (accessed ).