Williams says counterparties need repo rates materially above SRF rate before using the facility due to frictions.
“These frictions add to the costs that counterparties face when using the facility and mean that counterparties generally require private market repo rates to trade materially above the SRF minimum bid rate before using the facility.”
Williams notes the SRF was used at June quarter end and mid-September as reserve levels fall.
“But as reserve levels fall this is shifting somewhat, with the SRF used at the recent June quarter end and at the mid-September tax date.”
Williams says sizeable Standing Repo Facility usage is fully expected and desirable when economically sensible.
“Given the criticality of those aims, it is desirable and fully expected that the SRF be used whenever it is economically sensible to do so.”
Williams notes the Standing Repo Facility has been little used because reserves remained abundant.
“The SRF has been much less extensively used than the ON RRP to date, since reserves have been abundant over recent years.”
Williams announces the Desk will soon implement daily morning SRF operations with morning settlement.
“In fact, as I mentioned nearly two weeks ago, in the not-too-distant future the Desk will start implementing daily morning SRF operations that will also be settled in the morning.”