Developments in the Australian Repo Market

Chris Becker, Ashley Fang and Jin Cong Wang
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Chris Becker: Reserve Bank of Australia
Ashley Fang: Reserve Bank of Australia
Jin Cong Wang: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2016, 41-46

Abstract: The market for repurchase agreements (repos) – where cash is borrowed and lent using securities as collateral – plays an important role in the implementation of monetary policy and as a source of finance for the bond market. The Reserve Bank has commenced publishing more detailed data about the repo market. This article introduces these data and highlights some key developments. The domestic repo market has grown considerably in recent years, with non-residents emerging as prominent borrowers of cash in return for securities. The spread between repo rates and expectations for the cash rate has risen noticeably over the past couple of years. This increase appears to be linked to developments in the foreign exchange swap market as well as arbitrage related to the Australian bond futures market. Demand from non-residents to fund trading activities and, to a lesser extent, regulatory requirements have contributed to the increase in repo rates.

Keywords: repo; foreign exchange swap basis; futures (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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