HALISTER1: Debt Ceiling May Spur Rise in Money Market Repo Allocations: JPM

Debt Ceiling May Spur Rise in Money Market Repo Allocations: JPM

(Bloomberg) -- Money funds may start increasing their repo allocations, as the U.S. Treasury is expected to slash near-term bill supply in order to draw down its cash balance to $70b by Dec. 8, the end of the debt ceiling suspension, JPMorgan strategists led by Alex Roever said in Oct. 20 note.
  • Increased repo investment may keep overnight financing rates low in the near term and put “substantial widening pressure” on front-end Treasury/OIS spreads
  • Treasury/OIS spreads should remain wide as long as Treasury “undertakes extraordinary actions”
  • NOTE: Treasury’s cash balance $201b as of Oct. 19
To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net Greg Chang

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Alex Roever (JP Morgan Securities LLC)

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