Government bond-backed repo markets: between resilience and vulnerability

Ayelen Banegas, Lucas Devigne, Mulalo Mamburu, Kleopatra Nikolaou, Anna Samarina () and Fabio Tamburrini ()
Additional contact information
Ayelen Banegas: https://www.federalreserve.gov/econres/ayelen-banegas.htm
Lucas Devigne: https://www.banque-france.fr/en/lucas-devigne
Kleopatra Nikolaou: https://www.ecb.europa.eu/pub/research/authors/profiles/kleopatra-nikolaou.en.html
Anna Samarina: https://www.dnb.nl/en/research/personal-pages/anna-samarina/
Fabio Tamburrini: https://www.ecb.europa.eu/pub/research/authors/profiles/fabio-tamburrini.en.html

No 2026-057, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper synthesizes the literature on vulnerabilities in government bond-backed repo markets, focusing on the features that contribute to both the fragility and stability of these markets. The literature shows that the same features that enable efficient liquidity provision, including short-term funding, dealer intermediation, extensive collateral reuse, and low haircuts, can also create channels for rapid transmission of stress. The review documents tight linkages between repo and government bond markets, highlighting how repos are key to the build-up of leverage and can propagate stress across funding, cash, and derivatives markets, particularly through dealers and nonbank financial intermediaries such as investment firms, hedge funds, and money market funds. Evidence from recent stress episodes illustrates how these vulnerabilities materialize in practice. The review also examines post-crisis regulatory reforms and central bank interventions, identifying how these measures have enhanced market resilience while also creating trade-offs for market dynamics, with implications for liquidity and collateral availability.

Keywords: repo markets; government bonds; vulnerabilities; financial stability (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 G20 (search for similar items in EconPapers)
Pages: 49 p.
Date: 2026-08-12
New Economics Papers: this item is included in nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103647

DOI: 10.17016/FEDS.2026.057

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