Jay Kahn
@jstatistic
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Economist studying markets that work best when no one notices: repo, Treasuries, safe assets. Alum @MichiganRoss, @SimonSchool, @Reed_College_. Views my own.
Washington, DC
Joined October 2014
No one really knows how big the U.S. repo market is. Or rather, no one đť‘‘đť‘–đť‘‘. We combed through the appendixes to a decade of annual reports for over 150 dealers and banks to get the full picture. The total? $12 trillion, almost doubling previous estimates.
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RT @EtraAlex: It reflects repo activity of Canadian banks. I am reasonably confident when we get June data we will see a decline in LT UST/….
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RT @ScottSkyrm: The Fed put the size of the REPO market at $11.9 trillion, an increase of 70% over the past 10 years. They adjusted for a….
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Getting the full picture on repo exposures is key. Without gross data, matched book intermediation looks smaller than it is, and net funding appears larger, overstating dealers’ use of repo to finance their own positions.
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Matched book intermediation is sometimes attributed to post-crisis regulations like the SLR, which incentivizes netting repo activity against reverse repo. But we find no significant difference in matched book use between dealers subject to the SLR and those that aren't.
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One striking finding: most dealers in repo are just passing flows through. Matched books, where cash moves from MMFs to hedge funds, drive most of the variation in repo activity. Growing repo volumes are funding strategies like the basis trade, not dealer inventories.
No one really knows how big the U.S. repo market is. Or rather, no one đť‘‘đť‘–đť‘‘. We combed through the appendixes to a decade of annual reports for over 150 dealers and banks to get the full picture. The total? $12 trillion, almost doubling previous estimates.
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RT @VARshad_: This kind of foundational (and painstaking) data work is a big deal: Repo outstanding is much bigger than previous thought.
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Why it matters:. Repo is the backbone of Treasury market functioning, hedge fund leverage, and monetary policy transmission. But even basic facts, like the total size of the market, haven’t had clear answers. This note helps fill that gap.
federalreserve.gov
The Federal Reserve Board of Governors in Washington DC.
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Most public figures rely on net exposures or focus only on certain banks or markets. We build up a gross estimate using:.• FOCUS annual reports.• Holding company 10-Ks.• Transaction-level data from cleared and tri-party repo. That helps capture the full scale of activity.
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RT @VARshad_: One of the charts I recently threw together on US Treasury debt held by the public . Depicts the post-pandemic “alligator jaw….
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Very happy to say this paper has now been accepted at the Journal of Monetary Economics!.
We've put out an update to our 2021 paper, now titled "Hedge funds and the Treasury cash-futures basis trade," for a resubmission. Want to know what drove the increase in basis trade volumes prior to March 2020? We've got you covered. A couple details below 👇
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Waller and Logan discussing the Fed's balance sheet:
dallasfed.org
The Federal Reserve Bank of Dallas and the World Affairs Council of Dallas/Fort Worth hosted a conversation with Governor Christopher J. Waller of the Federal Reserve Board of Governors.
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The ECB puts EGB gross futures for offshore funds at like €60 billion. BoE puts total hedge fund gilt repo at <£100B. Levered fund short UST futures are >$1 *trillion* and repo borrowing is >$2.5 trillion.
@StevenKelly49 Yet outside of the U.S. and maybe U.K. it's not clear to me this is anything like the same scale of exposures?.
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RT @DavidBeckworth: A reader tells me the Bank of Amsterdam was an important early central bank that operated a demand-driven ceiling syste….
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More discussion in the thread here:
As dealers rely more on MMF repo, repo rates also become more sensitive to reserve changes. A marginal drop in reserves now forces them to bid harder for cash to maintain smaller and smaller buffers.
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Data is updated daily here: FEDS note it's based on is here:
federalreserve.gov
The Federal Reserve Board of Governors in Washington DC.
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