Money markets us repo rates fall as new quarter starts

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(Updates repo market action)NEW YORK Oct 1 A key borrowing cost for Wall Street dealers fell from three-month highs on Thursday as cash investors resumed lending at the start of the fourth quarter. The overnight rate on repurchase agreements was last quoted at 0.15 percent to 0.20 percent, down from 0.40 percent late on Wednesday, ICAP data showed. Towards the end of prior quarter, money market funds and other investors reduced their repo holdings in favor of near risk-free Treasury bills and reverse repurchase agreements offered by the Fed. In the $5 trillion repo market, Wall Street dealers borrow from money funds and other investors with Treasuries and other securities as collateral to fund their trades.

The elevated repo rates enticed investors and reduced their demand for Fed's reverse repos on Thursday. The U.S. central bank awarded $75.14 billion in overnight RRPs, down from $199.61 billion on Wednesday. Interest rates on U.S. Treasury bills that mature between now and year-end stayed in negative territory on Thursday as a measure that extends funding for federal agencies to Dec. 11 led the government to increase the amount of T-bills it will sell next week.

The Treasury Department had cut the sizes of its T-bill offerings in anticipation of the government hitting its statutory borrowing limit later this year. In addition to falling supply, safehaven demand due to recent market turmoil had pushed T-bill rates into record negative levels in September.

On Monday, the Treasury will sell $21 billion in three-month bills and $21 billion in six-month bills . Earlier this week, it sold $18 billion in three-month T-bills and $18 billion in six-month bills. The supply increase was not large enough to pressure T-bill rates back into positive territory, analysts said. T-bill rates on issues that come due next Thursday through Dec. 31 were last quoted at -0.010 percent to -0.025 percent, according to Tradeweb.