Overnight Repo Rate Soars As Bill Contagion Now Raging In Shadow Markets

Tyler Durden's picture

Now that the long overdue (and predicted) contagion from the cash market has hit repo, things are going from bad to horrifying. Following overnight news that HK is hiking haircuts on Bill collateral, and with increasingly more counterparties now segregating what collateral is eligible, if not shutting down the bill market outright, suddenly the universe of eligible repo market securities has imploded. It also means the overnight repo rate, as we said on Monday would happen, is exploding. Moments ago ICAP reported, via SMRA, that the general collateral overnight rate has nearly doubled from 0.15% to 0.27% and rising.

To wit from Stone McCarthy:

The overnight GC rate has been surging due to the debt ceiling risks, and that continued this morning as the rate surged to 0.27%. That is the highest the early morning GC rate has been since April 12th. Fed funds opened at 0.10% for the second consecutive session. Prior to yesterday, it had traded at 0.09% early every morning since September 9th except September 30th ahead of quarter-end. Yesterday's Fed funds effective rate was 0.09%. It was 0.06% for quarter-end, but outside of that it has held between 0.07% and 0.09% since June 18th.


And while the bond market is batting down the hatches and preparing for the worst, stocks are once again soaring on regurgitated non-news from 5 days ago.


Meanwhile T-Bill yields escalate:


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Stuart's picture

Death by a thousand cuts.... more can kicking.  Cowards, incompetent cowards.  

TrustWho's picture

ARROGANT COWARDS who think we are stupid and do not care about the young who can not vote!!!!!!

Lewshine's picture

Thy prophesied "rocket shot" that the one percent purchased yesterday and last night's pre-market....The surfs get the crumbs. Because the 200 day was challanged! You shall come thus far, and NO further!!! MACHINES.

CPL's picture

We all knew this was coming, like the last dozen times in four years.  Don't be glum chum, look at it this way:


  • Each time they print, they take away from themselves and further destroy their followers of the all mighty fiat trade and ALL agreements on paper (for better or worse)
  • Each time they stall, the bargaining position is taken down one more soap box with less and less wiggle room as they are painted into their own corner.
  • Each time they talk, the less anyone is going to listen in the public.  Right now the level of confidence is a head shake which will be downgraded to an eye roll in about a year.


Eventually they'll be friendless, broke and have the same appeal as herpes. And not a single shot had to be fired over something as worthless as fiat.

Those running the circus still have the opportunity to come clean and drop it, but they won't.  Bunch of them are far too tightly wound to let that happen, so they'll just self destruct like all greedy pricks do.

lolmao500's picture

The overnight GC rate has been surging due to the debt ceiling risks, and that continued this morning as the rate surged to 0.27%. That is the highest the early morning GC rate has been since April 12th.

So what. Bring me to 2008 levels then we can talk. Until then, MEH.

LawsofPhysics's picture

Exactly, hell, wake me when I see yields at their historical averages.

ChaosEquilibrium's picture

Rate of change over time is a VERY impotant concept to understand in making an intellgent analysis!!

LawsofPhysics's picture

LMFAO!!  So you still think there is a market reflecting true price discovery?  That is some funny shit.

Dr. Engali's picture

We've seen this picture a few times since 08. This move means nothing.

ManWithaPlan's picture

Look mommy, there's an airplane up in the sky...

29.5 hours's picture


Meanwhile, the rest of the world keeps plodding on, replacing the dollar...

China accelerated plans to internationalize its currency on Thursday by agreeing to swap euros and yuan with the European Central Bank in a deal that is set to be China’s second-largest to date.


SheepDog-One's picture

Hockey helmeted equity kids seem unfazed, still out in the sandbox playing tug-o-war with the cat turds.

BandGap's picture

Best visual depictment so far.

Cdad's picture

Come on, Tyler. You and I know that the only thing that matters is that the Russell 2000 goes higher [because criminal syndicate Wall Street banks are loaded to the gills with equities and Average Joe wants no part of them, and the only way to secure higher year end bonuses to mark them up so that HFT dudes can sell them short at all time highs...right before the first bank blows out its inventory to the slowest algo in the room at that time]

Bangin7GramRocks's picture

Why should they care, the Fed will buy whatever amount needed to keep the Dow near 15,000. I don't mind the guys who understand the game and are just trying to make more money. It's the disingenuous cunts on CNBC and elsewhere who try to convince you that the economy is in good shape and the markets are actually priced properly. They all need to be curb stomped!

remain calm's picture

Can someone post a good article or review of what repo rates means? I have a science background, I was never educated on the concept. Thanks in advance

LawsofPhysics's picture

I can understand how someone with an education based on fact may have a problem understanding fiction or "mark to fantasy" accounting. 

Dr. Engali's picture

An overnight repo is when an institution will sell securities to another institution overnight with the promise that they will buy them back the next day. The "rate" is the price they have to pay to buy the securities back. Institutions will do this for short term liquidity, and they will do it at the end of the quarter to get certain securities off of their books when they report. iIt also makes them look like they have more liquidity then they actually do.

CunnyFunt's picture

Damn! I thought it had to do with muscle-bound bald guys with piercings, tattoos and designer goatees, driving F350s with tow dollies late at night.

Dr. Engali's picture

Or it can be that as well.

TwoHoot's picture

It helps to know that "repo" stands for "Repurchase Agreement" in the financial worldt. Dr Engali has the definition right.

In the non-financial world, "Repo" usually means "reposession", which is what happens when you don't make your car payments.

The jargon is to make sure you don't understand and feel compelled to hire a financial advisor.

Jethro's picture

Well, this is interesting. Looks like the start of a parabolic function.

blackbeardz's picture

After Boris Yellen brings 3D printing to the FeedBox equity turds will firm up. BTFD.


NuYawkFrankie's picture

Anyone know who Bill Contagion is?

Any relation to Bill Battering from one of yesterday's ZH headlines?


lesterbegood's picture

Brics and big banks dumping the trash?