Scott Skyrm
@ScottSkyrm
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Executive Vice President at Curvature Securities. Author of: The Repo Market Shorts Shortages & Squeezes, More Rogue Traders, Rogue Traders, The Money Noose
Joined April 2012
When the SEC announced the central clearing "mandate" on Sept 14, 2022, the vol of Sponsored Repo at FICC was only $280B. When the rule was finalized Dec 2023, activity was up to $924B and now stands at $1.8T. Before the rule even begins, the SEC accomplished much of their goal
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The February Treasury issuance schedule changed since the beginning of the month. The Treasury increased total net new issuance from $113 billion to $156 billion
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The market is pricing an 8% chance of a cut at the March 19 FOMC meeting, the first full 25 bps ease is priced-in by Sept and there are 1.5 25-bps cuts by the end of the year. The terminal fed funds target range is expected to be 4.00%/3.75% by the beginning of 2026
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Once again, I find the easing scenario unlikely. I believe the Fed will either start a new cutting cycle with multiple eases or not change policy for an extended period of time
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It feels like the soft funding is over. Whereas overnight rates were persistently soft during the month of January, there is persistent funding pressure, so far, during the month of February
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The spread between agency MBS collateral and Treasury collateral trends over time, based on the supply and demand dynamics in each market. Overnight, agency MBS averaged 2.2 basis points above Treasurys so far in 2025, and 2.6 basis points in 2024
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Historically, the MBS/GC spread widens over statement period s, like month-end and quarter-end. However, O/N rates spiked for Sept quarter-end and year-end, indicating a decrease in liquidity. Quarter-ends are a window into what's going on behind the scenes in the REPO market
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February Funding -There are $113B net new Treasurys being issued into the market. Settlements will affect O/N rates 2 days -Feb 25th, when there's an $85B paydown and month-end with $136B in new settlements. Most interesting - only $14B net new issuance on Feb 18 -the refunding
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Last week was a milestone. Balance Sheet Runoff (BSR) hit the $2T mark. The Fed's SOMA portfolio peaked on April 13, 2022 and "ran down" each month since then
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RT @Analystlearner: @geomacromarkets @ScottSkyrm Repo is not disordered, but it's disorder is growing. Subtlety is important here. B/s are…
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RT @Analystlearner: @ScottSkyrm I did my summer Holiday with it, and i got to say that it was a great piece. Especially the chapter on the…
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We are expecting funding pressure for month-end in REPO today. Just like the last few months, pressure began to build earlier this week. The market already traded from 4.40% to 4.46% and last at 4.44%. I expect pressure in the morning and a soft close
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Love it !
@ScottSkyrm I did my summer Holiday with it, and i got to say that it was a great piece. Especially the chapter on the primary dealer. You're probably right at the end of the book when you're saying that SRF will probably be used on a daily basis. I come to the same conclusion than yu
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Picture this: You can go on winter break with the kids and come back knowing all about the Repo market!
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FOMC Results No change in Fed policy: Fed fund target range: 4.50%-4.25% RRP rate: 4.25% SRF rate: 4.50% BSR: $60 billion a month
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RT @Analystlearner: @ScottSkyrm The disorder in the repo is coinciding with the disorder in the stock market. On this path, i don't see how…
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The market says there's effectively a zero percent chance the FOMC eases. No change in the target range and no change in the RRP rate
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Balance Sheet Runoff (BSR) is the wildcard. Though there is no adjustment expected at this meeting, there will be a change in the future. The current thinking is that the Fed wants a smaller SOMA portfolio and they prefer BSR to continue as long as possible
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The limiting factor is market liquidity. The Fed is forced to supply market liquidity in the face of large Treasury issuance and BSR. The cut in the RRP rate was to incentivize cash investors to move liquidity out of the RRP facility and into the overall market
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There's also talk about the Treasury running down the TGA account, which would reduce the supply of securities in the market and increase overall liquidity. Theoretically, the Fed has room to continue BSR for several more months
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