From an August 30 article by Reuters reporter Karen Brettell:
Pockets of the fixed income and money markets are starting to reflect concern that recent volatility will extend past August, and that growing risk aversion may again roil banks and funding markets.
One sign of worry is the increasing reluctance of banks to use their balance sheets to facilitate trades, which has hit sectors from corporate bonds to the short-term repurchase market, where there is $1.6 trillion (980.8 billion pound) in triparty loans.
For example, banks have reduced activity in the intra-dealer Treasury repurchase agreement market by 63 percent since the end of June, according to Barclays Capital.
To some, this spreading risk aversion suggests that an autumn of troubling headlines could again spark a freeze like the 2008 crisis.
Problems are centered in Europe, reports Brettell.
Thanks to Reuters for watching repo markets and to University of Oregon professor Mark Thoma for including the Reuter’s story in his September 1 Economist’s View blog.
The publicly available data that RepoWatch tracks shows a mild tightening. For example:
–Primary dealer volume is up slightly, compared to the end of June, but overnight repos rose from 63 percent to 68 percent during that period, which is the time comparison Reuters uses. The rising preference for overnight repos suggests risk aversion is growing, as Reuters describes.
-Meanwhile, rates for repos collateralized with government securities are rising modestly, as reported by the Depository Trust & Clearing Corp.