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RepoWatch roundup of repo data

Last updated June 26, 2012

RepoWatch’s quarterly roundup of repo data shows a very slow-growing financial market dominated by the mega-banks and still relying largely on collateral that is guaranteed by the U.S. taxpayer:

PRIMARY DEALERS

(1) Federal Reserve primary dealers, repo volume, in billions: 

Most recent high, 3-2-08: $4,567.2 billion
Most recent low, 9-30-09: $2,221.4 billion
January 26, 2011:  $2,669.1 billion
February 23, 2011: $2,770.0 billion

(2) Percent of primary dealer repo that is overnight, rather than longer term:

Most recent high, 3-19-08:   66 percent
 Most recent low, 12-30-09:   60 percent
 February 23, 2011:   68 percent

(3) Primary dealers, repo volume collateralized by corporate securities (bonds, notes, CMOs, REMICs, stripped securities, private placements, commercial paper), in billions:

January 26, 2011:  $187.7 billion
February 23, 2011: $189.0 billion

(4) Primary dealers, repo volume collateralized by  mortgage-backed securities covered by government guarantees, in billions:

January 26, 2011:  $707.2 billion
February 23, 2011: $719.8 billion

Primary dealers are 21 broker-dealers approved to do repurchase transactions with the Federal Reserve Bank of New York. They’re thought to represent about 90 percent of the U.S. repurchase market. Their weekly data, which seems to be the largest and oldest regularly-reported dataset for repo, is available electronically back to July 1994.

TRI-PARTY REPO

(5) U.S. tri-party repo market, volume in billions and number of transactions:

January 1, 2011: $1,621.37 billion; 6,359 deals
February 9, 2011: $1,641.25 billion; 6,478 deals.

(6) U.S. tri-party repo concentration by top 3 dealers:

January 1, 2011:  43 percent
February 9, 2011:  42 percent

(7) U.S. tri-party repo market, collateral in billions, with (market share) (margin*), February 9, 2011:

$495.24 billion (30.2%)(2%): Agency Mortgage-Backed Securities
$491.03 billion (29.9%)(2%): US Treasuries excluding Strips
$150.60 billion (9.2%)(2%): Agency Debentures & Strips
$131.25 billion (8.0%)(3%): Agency CMOs
$86.17 billion (5.3%)(5%): Corporates, Investment Grade
$79.56 billion (4.8%)(8%): Equities
$46.02 billion (2.8%)(2%): US Treasuries Strips
$39.75 billion (2.4%)(5%): Asset-Backed Securities (Investment & Non Investment Grade)
$33.32 billion (2.0%)(8%): Corporates, Non Investment Grade
$28.45 billion (1.7%)(5%): Money Market Instruments
$21.25 billion (1.3%)(8%): CMO Private Label, Non Investment Grade
$20.83 billion (1.3%)(5%): CMO Private Label, Investment Grade
$17.78 billion (1.1%)(na): Other (CDOs, International Securities, Municipality Debt, and Whole Loans)

The tri-party repo market is thought to represent about one-fourth of all U.S. repos. It is different from the more common bilateral market because in tri-party there are clearing banks, mainly J.P. Morgan Chase and Bank of New York Mellon, that stand in the middle of every transaction, providing such services as settling the transaction and valuing and managing collateral. In this role, J.P. Morgan and the Bank of New York were Ground Zero for systemic risk in the financial crisis, and much of the bailout was designed to save them. The tri-party market is important to the Federal Reserve because the Fed implements monetary policy through its transactions there. In the tri-party repo market, broker-dealers are the biggest borrowers and money market funds are the biggest lenders. The tri-party report tells how much of the market is in the hands of the top three dealers, but it does not identify those dealers. *”Margin” tells the median amount of extra collateral that a borrower had to post, above the loan amount, to get the repo loan. Tri-party participants began reporting this data monthly in May 2010, as part of an effort to make the market more transparent after the financial crisis.

THE DEPOSITORY TRUST & CLEARING CORPORATION

(8) The Depository Trust & Clearing Corporation, volume of General Collateral Finance Repurchase Agreements in billions:

 Most recent high, 11-1-10: $450.9 billion
 Most recent low, 5-14-10: $215.9 billion
 March 4, 2011: $360.4 billion

(9) The Depository Trust & Clearing Corporation, average interest rate paid each day on general collateral finance repos (March 4, 2011, 52-week high, 52-week low):

 Treasury Securities, 30-year and less: 0.140%, 0.311%, 0.131%
 Federal agency debt securities: 0.150%, 0.380%, 0.143%
 30-year mortgage-backed securities issued by Fannie Mae or Freddie Mac: 0.159%, 0.550%, 0.147%

The Depository Trust & Clearing Corporation began reporting daily repo volume and rates in April 2010.  Earlier, it reported an average daily value in 2009 of $691 billion, nearly unchanged from 2008. The company clears repurchase agreements that use government securities as collateral. This means DTCC guarantees completion of the trades. General collateral finance repurchase agreements are repos that will accept any kind of qualified government security as collateral, rather than requiring a certain security.

INTERNATIONAL CAPITAL MARKETS ASSOCIATION

(10) European repo market, volume, in billions:

 Most recent high June 13, 2007:  €6,775 billion
 Most recent low, December 10, 2008:  €4,633 billion
 June 9, 2010:  €6,979 billion ($8,409 billion)

The International Capital Markets Association’s European Repo Council conducts a survey of the European repurchase market twice a year, collecting information on volume, collateral, rates, counterparties, maturities and more. Respondents report both repo loans and borrowings, which means volumes are inflated by some double counting. The results of the council’s 19 surveys are posted online. The most recent survey was conducted December 8, 2010, and results have not yet been released.

FLOW OF FUNDS

(11) Security broker-dealers, repo borrowing outstanding, net of lending, in billions:

 Most recent high, September 30, 2007: $1,293.7 billion
 Most recent low, June 30, 2010: $334.2 billion
 September 30, 2010: $395.6 billion

(12) Money Market Mutual Funds, repo lending outstanding, in billions:

 Most recent high, September 30, 2008: $603.4 billion
 Most recent low, March 31, 2010: $440.1 billion
 September 30, 2010: $492.9 billion

(13) Security broker-dealers, assets, in billions:

 Before the bubble, September 30, 2000: $1,208.6 billion
 Most recent high, September 30, 2007: $3,238.9 billion
 Most recent low, March 31, 2009: $1,925.5 billion
 Most current, September 30, 2010: $2,083.0 billion

Yale professor Gary Gorton uses asset growth at broker-dealers to help judge growth in the repurchase market, because broker-dealers finance much of their growth through repo loans.

The Flow of Funds is the Federal Reserve’s quarterly report on the financial markets. It does not tell total repo volume for the U.S. repurchase market. It does not tell the level of commercial bank involvement in the repurchase market because it doesn’t separate repos from fed funds, which are the unsecured loans banks make to each other with the money they have on reserve with the Fed, and it often nets repo lending and repo borrowing.

SECURITIES AND EXCHANGE COMMISSION

(14) U.S. ‘s largest bank holding companies, repurchase borrowings, in billions:

Bank of America
2009: $369.9 billion
2010: $353.7 billion
Daily average including Federal Funds borrowing

J.P. Morgan Chase
2009: $245.7 billion
2010: #262.7 billion
Year-end, does not include Federal Funds borrowing

Citigroup
2009: $129.7 billion
2010: $160.6 billion
Year-end, does not include Federal Funds borrowing

Wells Fargo & Co.
2009: $24.2 billion
2010: $30.5 billion
Daily average including Federal Funds borrowing

Goldman Sachs
2009: $138.7 billion
2010: $146.2 billion
Daily average, does not include Federal Funds borrowing

Regulators permit netting of repo borrowings with repo loans when conducted with the same counterparty.

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