Monday, August 8, 2016

SIFMA Issues 2016 Repo Market Fact Sheet


Author: David Schwartz J.D. CPA

On July 21, 2016, the Securities Industry and Financial Markets Association (SIFMA) issued its latest annual update and overview  of the U.S. repo market.  SIFMA measured the daily turnover of the US repo market from June 2015 to June 2016 at $2.2 trillion. During that same period, the triparty repo market, which makes up a major portion of the U.S. repo market, was dominated by US government securities. SIFMA found that US treasury securities made up 48.5 percent of the triparty repo market, with the remaining collateral pool comprised of non-agency mortgage-backed and asset-backed securities (30.1%), equities (7%), corporate bonds (4.8%), and federal agency and government sponsored enterprises securities (2.6%).  

 

SIFMA credits, at least in part, new regulation and consistent and well crafted standardized transaction documents for the continued strength, resiliency, and safety of the U.S. repo market, saying: "recent reforms in the triparty repo market have further enhanced the resiliency of this market. Market standard documentation, broadly accepted in the market, provides further certainty for market participants."

 

The fact sheet also reiterates the what SIFMA sees as the main benefits of the US repo market. 

 

"A liquid and developed repo market allows market participants, most prominently the primary dealers1, to act as market makers in fixed income securities and thus contribute to the highly liquid secondary markets in these securities. In particular, the active repo market allows market makers to finance an inventory of securities and to source securities that are not in inventory in order to meet secondary market, or investor, demand. This ability to finance and source securities in an efficient way contributes to lowering interest rates paid by the issuers, most notably the U.S. Treasury. This, in turn, lowers the debt-service cost borne by taxpayers."

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