Wednesday, June 15, 2016

April Fed Statistics Reveal Decrease in Collateral in the U.S. Tri-Party Repo Market

The Federal Reserve Bank of New York's (Fed) recently released its April 2016 statistics for the U.S. Tri-Party Repo Market reveal that between March 9, 2016 and April 11, 2016, total tri-party repo collateral decreased by approximately $82 billion to $1.517 trillion. The bulk of the decrease in collateral was attributed to US Treasuries, excluding Strips.  The collateral value for US Treasuries Strips actually increased slightly from approximately $32 billion to $35 billion. Reversing an increase in March, April figures show that equities collateral decreased by $5 billion to total collateral of $113.5 billion, a 12-month low. The data showed very little change in the collateral value for agency MBS which saw a slight decrease of $820 million to a total value of $419.54 billion.


Median margin levels remained relatively stable, while CDO collateral increased from 9% to a margin level of 15%, whole loans collateral decreased from 10% to 6%, agency CMOs had a slight decrease of 0.9% to 3%, and ABS investment grade collateral decreased 0.2% to 5%.


The Fed’s monthly data collection on tri-party repo is a part of their larger effort to address insufficient data in the repo market.  In the Financial Stability Board’s August 2013 consultative document, “Strengthening Oversight and Regulation of Shadow Banking,” the FSB identified the lack of sufficiently granular data as a serious impediment to understanding the repo and securities lending exposures amongst large financial institutions. In response, the Fed proposed new data collections for tri-party repo in their August 2014 staff report, "Repo Runs: Evidence from the Tri-Party Repo Market."