Home > Views > Blogs > Market Movers > The Repo Market Crunch
EMAIL
PRINT
RSS
SHARE
TEXT SIZE:
SHARE
Send a copy to me

Separate multiple email addresses (max 20) with commas.

0/1500

Main
Bad News for Bear Shareholders is Go...   Vikram Pandit Ousts Investment Banki...
Mar 17 2008 8:38AM EDT

The Repo Market Crunch

Not very long ago, when the market in Fannie and Freddie debt went pear-shaped, I tried to look on the bright side, saying that at this point we'd pretty much run out of formerly-liquid securities which have now gotten credit-crunched: what other fixed-income markets were left to suffer a sudden liquidity crunch?

Today the WSJ tells me the answer: I'd forgotten about the repo markets. "In normal times, these loans are inexpensive and roll over easily," write Serena Ng and Randall Smith. "As with other kinds of short-term financing recently, the money is drying up."

Most investors don't rely overmuch on repo-market liquidity. But Bear Stearns did, and investment banks in general do, and insofar as Lehman Brothers is going to be attacked today, repo-market weakness is going to get a large share of the blame. Mortgage-backed bonds account for 29% of Lehman's total assets. Lehman might have been able to repo those assets out last week, but today the only entity willing to lend against them is likely to be the Fed, at 3.25%. Which admittedly is hardly punitive.

See more in

Loading...

Add Your Comment

Required fields are marked with an asterisk (*)
Add a comment

Recent Blog Posts

Archive

Previous
Dec
2008
Next


Also in Portfolio.com
Most Read
Most Emailed
Recently Commented