New York Federal Reserve Bank expands repo reference rates
12 June 2018 New York
Image: Shutterstock
The New York Federal Reserve Bank has been further expanding upon the three repo reference rates.
The Federal Reserve works in tandem with the US Office of Financial Research to produce the rates, based on overnight repo transactions secured by Treasury securities.
The aim is to to provide the public with more information regarding the interest rates associated with repo transactions.
The secured overnight financing rate (SOFR) provides a broad measure of the general cost of financing Treasury securities overnight.
It is calculated based on the data used for the broad general collateral rate (BGCR), plus transactions cleared through the Fixed Income Clearing Corporation's delivery-versus-payment (DVP) repo service.
In the DVP repo market, counterparties identify specific securities to serve as collateral for each trade, in contrast to the tri-party repo market, in which cash providers stipulate a population of acceptable collateral, also known as general collateral (GC).
As a result, the DVP repo market can be used to temporarily acquire specific securities.
Repos for specific-issue collateral may be executed at rates below those for GC trades if cash providers are willing to accept a lesser return on their cash in order to obtain a particular security. In this case, the specific securities are said to be trading "special".
In the calculation of the SOFR, DVP repo transactions are filtered to remove some (but not all) transactions considered "specials". The SOFR represents a median of rates across GC and trimmed DVP repo transactions.
In June last year, the Alternative Reference Rates Committee selected the SOFR as its recommended alternative to US dollar LIBOR.
The BGCR is a measure of rates on overnight Treasury GC repo transactions, and is calculated based on the same tri-party repo transactions used for the tri-party general collateral rate (TGCR), defined below, plus general collateral finance (GCF) repo transactions cleared through The Depository Trust & Clearing Corporation’s GCF Repo service.
The TGCR is a measure of rates on overnight, specific-counterparty tri-party repo transactions secured by Treasury securities, and is calculated based on data collected from the Bank of New York Mellon, excluding GCF Repo.
Specific-counterparty transactions refer to those in which the counterparties involved know each other’s identity at the time of the trade.
The Federal Reserve works in tandem with the US Office of Financial Research to produce the rates, based on overnight repo transactions secured by Treasury securities.
The aim is to to provide the public with more information regarding the interest rates associated with repo transactions.
The secured overnight financing rate (SOFR) provides a broad measure of the general cost of financing Treasury securities overnight.
It is calculated based on the data used for the broad general collateral rate (BGCR), plus transactions cleared through the Fixed Income Clearing Corporation's delivery-versus-payment (DVP) repo service.
In the DVP repo market, counterparties identify specific securities to serve as collateral for each trade, in contrast to the tri-party repo market, in which cash providers stipulate a population of acceptable collateral, also known as general collateral (GC).
As a result, the DVP repo market can be used to temporarily acquire specific securities.
Repos for specific-issue collateral may be executed at rates below those for GC trades if cash providers are willing to accept a lesser return on their cash in order to obtain a particular security. In this case, the specific securities are said to be trading "special".
In the calculation of the SOFR, DVP repo transactions are filtered to remove some (but not all) transactions considered "specials". The SOFR represents a median of rates across GC and trimmed DVP repo transactions.
In June last year, the Alternative Reference Rates Committee selected the SOFR as its recommended alternative to US dollar LIBOR.
The BGCR is a measure of rates on overnight Treasury GC repo transactions, and is calculated based on the same tri-party repo transactions used for the tri-party general collateral rate (TGCR), defined below, plus general collateral finance (GCF) repo transactions cleared through The Depository Trust & Clearing Corporation’s GCF Repo service.
The TGCR is a measure of rates on overnight, specific-counterparty tri-party repo transactions secured by Treasury securities, and is calculated based on data collected from the Bank of New York Mellon, excluding GCF Repo.
Specific-counterparty transactions refer to those in which the counterparties involved know each other’s identity at the time of the trade.
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