Repo liquidity has not improved from a year ago when Goldman Sachs cut 25% off its US$100bn repo book to meet regulatory requirements, an announcement that punctuated market complaints that regulators and the Fed were inadvertently flattening overnight funding markets. But it also has not become much worse, say market participants. Rates for US Treasury repurchase agreements have plateaued generally in the 15bp-20bp range in 2015 -excepting some sizeable spikes around quarter-end - illustrating that while liquidity is weaker, investors have learned to cope. "We've found participants have evolved more quickly to meet the changing market - all participants whether investors or borrowers are getting adept at managing to a much smaller repo market," said Kenneth Silliman, head of the repo trading desk at TD Securities.
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