Repo Rates Just Won’t Move Up, Will That Continue?

Repo rates are hovering just over the Fed’s overnight reverse repo (ON RRP) despite recent net positive bill issuances as Treasury raises cash for tax refunds. With fewer issuances in the near future and low dealer financing needs, the repo rate doesn’t look like it’s going to budge anytime soon.

“Repo rates are failing to move higher because absent the floor provided by the ON RRP, market short-term rates would have been beneath the 3bp floor coming into February,” writes Citi analyst Andrew Hollenhorst.

Recent net positive issuances at an end

Net bill issuance fell from recent highs of nearly $70 billion for the last two weeks to $23 billion, and it will remain low until cash management bills...