Bloomberg News

U.S. Repo Close: Current 5-Year Note at Lowest Rate, Minus 0.01%

October 20, 2011

Oct. 20 (Bloomberg) -- The following is a summary of closing rates in the market for U.S. repurchase agreements, or repos, in New York.

All repo rates are for overnight transactions at the bid side of the market as reported by GovPX Inc., a unit of ICAP Plc, the world’s largest inter-dealer broker.

Lowest Repo Rate as of 10 a.m. New York time:

The current 5-year note closed at the lowest repo rate: negative 0.01 percent, up from negative 0.07 percent.

Other Rates:

Old 2-year note: 0.12 percent, up from 0.1 percent.

Current 2-year note: 0.07 percent, up from 0.05 percent.

Old 3-year note: 0.08 percent, down from 0.1 percent.

Current 3-year note: 0.1 percent, unchanged.

Old 5-year note: 0.1 percent, unchanged.

Old 7-year note: 0.1 percent, unchanged.

Current 7-year note: 0.08 percent, down from 0.1 percent.

Old 10-year note: 0.07 percent, unchanged.

Current 10-year note: 0.09 percent, down from 0.12 percent.

Old 30-year bond: 0.07 percent, unchanged.

Current 30-year bond: 0.07 percent, unchanged.

The bid for a security is the price that is quoted and available for immediate sale of an asset. The offer is the price available for immediate purchase of an asset.

Current issues are the most recently issued securities, and old issues are those sold previously with the same maturity.

Specific Treasury securities in the greatest demand are considered to be “on special.” Firms that want to borrow them are willing to lend money overnight at rates below those on general collateral or other Treasuries in exchange for them.

Behind the Numbers

Securities firms use repos to borrow money to finance positions in Treasury, corporate and mortgage-backed securities. They also borrow securities on reverse repos to make deliveries of sales of securities the dealers don’t own, and engage in speculative repo trading based on expectations for the future direction of interest rates.

Current 5- and 10-year notes often trade at the lowest repo rates because they are widely used as hedges against positions in corporate, mortgage and global debt.

General Collateral

Delivery repos: 0.11 percent, unchanged. The collateral is sent to an investor’s bank against receipt of funds.

Triparty repos: 0.14 percent, unchanged. A clearing bank acts as a third party to make sure there’s adequate collateral behind the repo and that it conforms throughout the life of the transaction to the investor’s requirements, providing the customer with an additional layer of safety.

Securities firms are willing to pay higher rates to borrow money through triparty repos because they can allocate leftover collateral remaining at their clearing bank late in the day as backing for the transactions, saving on delivery costs.

Rates on general repos, or those backed by non-specific collateral, are usually set slightly below federal funds levels.

Treasury Bills

The three- and six-month Treasury bills closed at 0.13 percent, up from 0.1 percent.

Federal Funds

Federal funds, the overnight interbank lending rate, was at 0.08 percent, within the Federal Reserve’s target range of zero to 0.25 percent, according to ICAP.

--Editor: Paul Cox

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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