U.S. Repo Open: 10-Year Note Is at Lowest Rate of 1.95 Percent
2006-11-29 08:31 (New York)
By Ye Xie
Nov. 29 (Bloomberg) -- The following is a summary of early
trading in the market for U.S. repurchase agreements, or repos,
in New York. All repo rates are for overnight transactions based
on trading at nine repo brokers, as reported to GovPX Inc., a
unit of ICAP Plc, the world's largest interdealer broker.
Lowest Repo Rate as of 8 a.m. New York time:
The 10-year note, a 4 5/8 percent coupon maturing in
November 2016, opened with the lowest repo rate: 1.95 percent.
Other Rates:
Current two-year note: 5.25 percent.
Old two-year note: 4.75 percent.
Current three-year note: 5.25 percent.
Old three-year note: 5.25 percent.
Current five-year note: 5.2 percent.
Old five-year note: 5.25 percent.
Old 10-year note: 5 percent.
Current 30-year bond: 5.15 percent.
Old 30-year bond: 5.2 percent.
Current issues are the most recently issued securities, and
old issues are those sold previously with the same maturity.
Specific Treasury securities in the greatest demand are
considered to be ``on special.'' Firms that want to borrow them
are willing to lend money overnight at rates below those on
general collateral or other Treasuries in exchange for them.
Behind the Numbers
Securities firms use repos to borrow money to finance
positions in Treasury, corporate and mortgage-backed securities.
They also borrow securities on reverse repos to make deliveries
of sales of securities the dealers don't own, and engage in
speculative repo trading based on expectations for the future
direction of interest rates.
Current five- and 10-year notes often trade at the lowest
repo rates because they are widely used as hedges against
positions in corporate, mortgage and global debt.
General Collateral
Delivery repos: 5.27 percent. The collateral is sent to an
investor's bank against receipt of funds.
Triparty repos: 5.3 percent. A clearing bank acts as a third
party to make sure there's adequate collateral behind the repo
and that it conforms throughout the life of the transaction to
the investor's requirements, providing the customer with an
additional layer of safety.
Securities firms are willing to pay higher rates to borrow
money through triparty repos because they can allocate leftover
collateral remaining at their clearing bank late in the day as
backing for the transactions, saving on delivery costs.
Rates on general repos, or those backed by non-specific
collateral, are usually set slightly below federal funds levels.
Treasury Bills
The three- and six-month Treasury bills opened at 5.25
percent.
Federal Funds
Federal funds, the overnight interbank lending rate, opened
at 5 1/4 percent, in line with the Federal Reserve's target,
according to ICAP Plc. |
