Williams notes December 2024 showed market frictions when repo traded above SRF rates without facility use.
“We saw evidence of frictions in SRF usage over a few days in December 2024, when a substantial amount of tri-party repo transactions—for which the SRF should be a close substitute—took place in the market at rates above the SRF minimum bid rate.”
Williams reports Standing Repo Facility usage rose from zero to higher frequency over past two months.
“Over the past two months, SRF usage has risen from essentially zero to having greater frequency and higher volume of take-up, especially on days of temporary repo market pressures,”
Williams warns inconsistent risk management in Treasury repo could threaten market functioning if counterparties default.
“In the Treasury repo market, a lack of consistency and transparency in risk management practices could pose risks to market functioning if one or more counterparties were to default.”