NEW YORK Jan 30 Operational issues in the $1.87
trillion tri-party repurchase agreement market delayed
settlement of some trades on Tuesday by several hours, according
System problems required the New York Fed to keep its
Fedwire Securities Service, which is used to settle the loans,
open longer than usual. Many trades were not completed until 5
p.m. or later, compared with the normal 3 p.m. settlement time
in the market, traders in the market said.
Jonathan Freed, spokesman at the New York Fed, declined to
The repo market is widely used by firms to obtain short-term
funding, which is backed by high-quality collateral including
In the triparty market two large custodian banks, Bank of
New York Mellon Corp and JPMorgan Chase & Co
arrange for the settlement of loans between lenders and
borrowers, and manage collateral that is used to back the
Demand for some Treasuries to back loans has surged in the
past few weeks, creating a squeeze on the bonds and sending some
repo rates backed by the debt into negative territory this week.
The expiration of the Fed's Operation Twist program has
resulted in less short-term Treasuries available for purchase
while there is also more cash being invested in money funds that
are seeking out Treasuries.
A scarcity of seven-year notes in particular led dealers to
borrow the most debt from the Federal Reserve this week since
Analysts said some of that supply issue may ease this week
as the Treasury completes its auctions of $29 billion in
seven-year notes on Wednesday, the third auction of $99 billion
in new supply this week.