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Matthias Knab, Opalesque: Repo markets are critical to the functioning of the global financial system and have been involved in several recent episodes of stress, including the March 2020 dash for cash and September 2022 gilt market episode.
Report warns that leverage, demand and supply imbalances, and high levels of concentration within repo markets have the potential to create strains.
Report calls on authorities to consider actions to close data gaps, strengthen surveillance, and address vulnerabilities around the build-up of liquidity imbalances and leverage.
The Financial Stability Board (FSB) today published a report on Vulnerabilities in Government Bond-backed Repo Markets.
Repo markets play an important role in facilitating the flow of cash and securities throughout the financial system. The report focuses on the repo markets backed by government bond collateral as this makes up the vast majority of collateral used by market participants. The report estimates that approximately $16 trillion in repo trades backed by government bonds were outstanding, representing around 80% of the total stock of all repo trades, at end-2024.
The report highlights how quickly repo markets were impacted in several recent episodes of market stress and warns that, given the importance of repo markets within the global financial system, it is critical to preserve their functionality, particularly during periods of stress.
The report identifies severa...................... To view our full article Click here
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