HALISTER1: Post-Reform Repo Activity Concentrated in Foreign Banks: JPM

Post-Reform Repo Activity Concentrated in Foreign Banks: JPM

(Bloomberg) -- The repo market has become more concentrated by jurisdiction, with French, Japanese and U.K. banks accounting for 63% of balances as of end-August vs 44% in November 2012 as banks make “more efficient use of their balance sheets,” JPMorgan strategists led by Alex Roever said in Sept. 22 note.
  • Even though repo transactions with money funds don’t “necessarily qualify to be netted off balance sheet,” increased efficiencies with other counterparties can create more room
  • Dealer repo transactions in money funds have increased by 139% to $818b in August 2017 from $343b in June 2015, JPM said, citing Office of Financial Research data
  • Repo activity from French banks has grown by $139b during same time period; U.K. banks +$61b, Japanese banks +$59b
  • Fixed Income Clearing Corp.’s balances have grown to $6.6b as of August from $5b in June; balances are likely to grow, though they may remain small in the near-term given the need for a sponsoring bank
  • Until money market funds can directly access a centrally cleared repo platform, “which does not seem like it’s going to happen any time soon,” money funds will continue to have a need for dealer repo
To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Vivien Lou Chen

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Alex Roever (JP Morgan Securities LLC)

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