Repo markets are back in focus for the Fed’s Treasury Market Practice Group

Dan Barnes

The US Federal Reserve’s Treasury Market Practice Group (TMPG) has focused this month on discussing the status of repurchase agreement (repo) clearing and settlement within the working group and the working group focused on data and transparency in Treasury markets.

During the March sell-off, functioning in short-term markets worsened, particularly in commercial paper money markets, as liquidity and balance sheet availability becoming difficult to source.

In its meeting on 9th February the TMPG, which consists of representatives from capital market participants and Federal Reserve officials, continued a discussion began in its November meeting, whose minutes were released this month, in which it agreed to restart the previously paused effort to map the clearing and settlement landscape for Treasury and agency MBS funding markets, and to seek to identify any risk and resiliency issues.

The repo clearing and settlement working group was paused in March given the heightened focus on market functioning more broadly amid the coronavirus pandemic.

At the start of 2020 the working group had expressed plans to focus on mapping overnight and term clearing and settlement in core triparty repo, before continuing onto other segments of the repo market.

The co-chair of the repo clearing and settlement working group announced back in February 2020 that once the full set of maps are completed, the working group will seek to identify any risk and resiliency issues or other concerns, and consider whether further TMPG work is warranted, such as enhancements to the group’s recommended best practices or the publication of a note or whitepaper.

The initial draft of the core triparty maps was discussed in that meeting with members of the TMPG providing feedback on the maps.

©The DESK 2020