October 2022 issue contents
How Has Monetary and Regulatory Policy Affected Trading Relationships in the U.S. Repo Market?

Sriya Anbil and Zeynep Senyuz
Federal Reserve Board


We analyze the effects of changes in monetary and regulatory policy on trading dynamics in the U.S. triparty repo market. Using a confidential data set of transactions, we find that the Fed's reverse repo (RRP) facility led to a 16 percent reduction in cash lending by money market mutual funds (MMFs) eligible to transact with the Fed. We show that the RRP facility increased the bargaining power of MMFs on days when their borrowers, non-U.S. dealers, increased their window-dressing activity due to Basel III capital reforms. For those dealers reliant on eligible MMF funding, window dressing became more expensive, but the average rates they paid on other days remained stable because of anchoring by the facility. We also show that the RRP facility influenced the way MMFs managed their balance sheets, and directed them towards safer investments.

JEL Code: C32, E43, E52.