Presentation for the February 22, 201 7 Meeting of the Alternative - - PDF document

1

Presentation for the February 22, 2017 Meeting of the Alternative Reference Rates Committee Fixed Income Clearing Corporation (FICC) Data on Cleared Bilateral (DVP) Overnight Treasury Repo

2 The charts and tables in this presentation are intended to shed some light on the segment of the overnight bilateral repo market collateralized with U.S. Treasury securities and cleared by FICC through its Delivery-versus-Payment (DVP) repo service. FICC has provided an anonymized sample of data on all these trades from August 2014 through October 2016 to the Board of Governors. Board staff have conducted preliminary analysis of this data, including example calculations as to how inclusion of this data could affect the rates proposed for publication by the Federal Reserve Bank of New York and Office

• f Financial Research, and intend to publish a short FEDS Notes based on the material shown here.

Table 1 FICC DVP Repo and GC Repo Statistics (Average daily values Dec 17, 2015 to Oct 31, 2016) FICC DVP Tri-party

• ex. GCF

GCF Federal Reserve Trades All Recently Issued* Seasoned* volume ($ billions) $424 $103 $320 $278 $46 $92 standard deviation ($ billions) $22 $10 $19 $30 $13 $71 median rate (basis points) 42 27 44 31 48 25 standard deviation (basis points) 8 12 8 3 11 share above Federal Reserve ONRRP rate 79% 60% 85% 99.7% 99.7% * Recently issued includes DVP transactions using on-the-run and first-off-the-run collateral, while seasoned includes all other transactions.

3 Table 2 Difference between FRBNY and OFR Proposed GC Repo Rates with and without FICC DVP Repo (Dec 17, 2015 to Oct 31, 2016) Rate 1 (Tri-party ex. GCF) Rate 2 (Tri-party including GCF) Rate 3 (Tri-party including GCF and Fed trades) Base rate With seasoned DVP Base rate With seasoned DVP Base rate With seasoned DVP average volume ($ billions) $278 $598 $324 $644 $416 $736 standard deviation

• f volume

($ billions) $30 $40 $25 $33 $59 $72 volume-weighted median rate (basis points) 31 32 31 33 30 31 standard deviation

• f the median rate

(basis points) 3 4 3 4 3 3

4

50 100 150 200 250 300 350 400 450 500 50 100 150 200 250 300 350 400 450 500 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Billions

Figure 1 Overnight Treasury Repo Volumes

DVP Fed OMOs Triparty GCF

• 0.20

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

• 0.20

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Figure 2 Overnight Treasury Repo Rates (percent)

GCF DVP Triparty Fed OMOs

5

10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100

• 0.10 -0.05

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 0.65 0.70

Billions

Figure 3 Overnight Treasury Repo Rate Distributions

(average daily volume 12/17/2015 to 10/31/2016)

Fed ONRRP Triparty DVP seasoned collateral DVP recently issued collateral GCF

• 0.10

0.10 0.30 0.50 0.70 0.90 1.10 1.30

• 0.10

0.10 0.30 0.50 0.70 0.90 1.10 1.30 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Figure 4 DVP Seasoned Collateral Rate Distribution (percent)

DVP 10th to 90th percentiles DVP Interquartile Range DVP median Triparty median GCF median ONRRP median

6

0.00 0.10 0.20 0.30 0.40 0.50 0.00 0.10 0.20 0.30 0.40 0.50 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16

Figure 5

Rate 1 with and without DVP (percent)

Rate 1 with DVP (seasoned collateral) Rate 1 base 0.00 0.10 0.20 0.30 0.40 0.50 0.00 0.10 0.20 0.30 0.40 0.50 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16

Rate 2 with and without DVP (percent)

Rate 2 with DVP (seasoned collateral) Rate 2 base 0.00 0.10 0.20 0.30 0.40 0.50 0.00 0.10 0.20 0.30 0.40 0.50 Sep‐14 Dec‐14 Mar‐15 Jun‐15 Sep‐15 Dec‐15 Mar‐16 Jun‐16 Sep‐16

Rate 3 with and without DVP (percent)

Rate 3 with DVP (seasoned collateral) Rate 3 base

7

• 0.02

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18

• 0.02

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Figure 6 Effect on Proposed Rates of Including Seasoned DVP (percentage points)

Rate 3 difference Rate 2 difference Rate 1 difference

• 0.05

0.15 0.35 0.55 0.75 0.95 1.15 1.35

• 0.05

0.15 0.35 0.55 0.75 0.95 1.15 1.35 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Figure 7 Distributions of Rate 3 with and without Seasoned DVP (percent)

with DVP - 5th and 95th percentiles with DVP - 25th and 75th percentiles without DVP - 5th and 95th percentiles without DVP - 25th and 75th percentiles