Bonds News

UPDATE 1-Cost of overnight repo loans jumps

(Adds quote, Treasury auctions)

March 2 (Reuters) - The cost to borrow funds overnight in the U.S. repurchase agreement market jumped on Monday, as dealers settled Treasury debt auctions and as concerns about the economic impact of the spread of the coronavirus spread.

The cost to borrow overnight in a repo backed by Treasuries jumped to 1.80% on Monday from 1.65% on Friday.

The increase comes even as the Federal Reserve is pumping liquidity into the market in a bid to avoid a spike in borrowing rates like last September, when demand for the short-term loans overwhelmed supply.

Tom Simons, a money market economist at Jefferies in New York, said the increase in the repo rate is most likely due to Treasury auction settlements, instead of concerns about the spreading coronavirus.

“I think it’s almost entirely a supply issue and not a credit issue,” Simons said.

The Treasury Department sold $113 billion in short- and intermediate-dated debt last week in addition to $18 billion in two-year floating-rate notes.

Investors are watching the lending markets for any indications of stress as the coronavirus spreads globally and threatens to dampen economic growth. (Reporting by Karen Brettell; editing by Jonathan Oatis)