Williams notes most non-centrally cleared bilateral repo transactions involving Treasury securities had zero haircuts according to OFR data.
“Meanwhile, in the NCCBR market segment, use of repo haircuts is fairly infrequent, with two pilot data collections in the NCCBR segment by the Office of Financial Research showing the majority of transactions involving Treasury securities had zero haircuts.”
Williams argues widespread use of haircuts for Treasury repo could enhance financial system stability during stress.
“In my view, widespread use of haircuts for Treasury repo could enhance financial system stability and support market functioning during periods of stress.”