By Katy Burne
The Federal Reserve Bank of New York is considering publishing three new bank-borrowing rates to improve transparency in an arcane but critical corner of short-term lending across Wall Street called repurchase agreements, or "repos."
The New York Fed on Friday said the new benchmark rates would all be based on overnight repo lending transactions backed by U.S. government debt, and likely would start publishing in late 2017 or early 2018 in coordination with the Treasury Department.
The proposed benchmarks come as a central-bank-sponsored group has been working since 2014 to find a credible alternative to the London interbank offered rate, which was discovered tohave been manipulated by banks for their own benefit following the financial crisis.
The Alternative Reference Rates Committee earlier this year landed on two candidates, a new overnight bank borrowing rate launched by the Fed in March and a newly comprehensive bank repo rate that had never been calculated before. The Fed's new repo rates likely will stand in for that second option in the ARRC's discussions, traders and analysts said.
The Treasury and the New York Fed have been moving to bolster the repo market since weaknesses surfaced in the financial crisis, exposing a dependency by securities dealers on short-term funding through repos. In recent months, the government also has been plugging gaps in public data on repos in an effort to better understand the different array of lending arrangements and their influences on U.S. money markets.
The New York Fed said its focus in the new publication of benchmarks would be Treasury-backed repos called GC repos, short for loans backed by "general collateral" debt. The proposed Treasury GC repo benchmarks would be based on transaction-level data provided by the industry, the Fed said.
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(END) Dow Jones Newswires
November 04, 2016 11:20 ET (15:20 GMT)
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