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G-30 Liquidity Panic: Standing REPOs and Centralized Clearing

Updated: Aug 5, 2021

August 3, 2021 | Updated | This week The Institutional Risk Analyst is at Leen’s Lodge in Grand Lake Stream, ME, for the annual Camp Kotok event. We use this opportunity to describe what’s next in terms of structural changes for US interest rates and the money markets. As a primer, read that very popular post (“Fed Prepares to Go Direct with Liquidity”) and then buckle your shoulder harnesses. Many of the changes to the US Treasury and REPO markets that were predicted in our comment this past May are coming to fruition.


These changes to the structure of US markets arise because of growing concerns over the stability and liquidity of the market in US Treasury securities, fears that already led the Federal Reserve Board to hike the interest rates paid on bank reserves a month ago. Notice, all you economistas, that the Fed has discontinued the series on interest paid on excess reserves but there is as yet no replacement series visible on FRED.