The U.S. overnight repurchase rate was elevated on Tuesday after funding pressures the previous session saw the general collateral (GC) repo rate climb as high as 0.12% due to the settlement of last week's Treasury auctions, traders said.
The overnight repo rate measures the cost of borrowing short-term cash using Treasuries or other debt securities as collateral.
One of many overnight repo rates, the GC rate refers to the level or figure corresponding to a basket of securities that trade normally. GC securities can be substituted for one another without changing the repo rate.
On Tuesday, the average GC rate so far at midday was 0.062%, compared with 0.057% in the same period on Monday, traders said. The rate hit a high of 0.12% on Monday.
"No doubt the settlement of the 2-year, 5-year, and 7-year added to the pressure," said Scott Skyrm, executive vice president in fixed income and repo at Curvature Securities in New York.
Last week, the U.S. Treasury sold $183 billion in notes of those maturities.
Skyrm said lingering month-end pressure had also pushed the repo rates higher, although Friday, the last trading day of July, saw funding rates at an average of 0.04%.
Lou Crandall, chief economist at Wrightson ICAP, said Monday's unexpected rise in repo rates attracted cash that would have otherwise gone to the Federal Reserve's reverse repo facility.
On Monday, the reverse repo volume slid to $921.317 billion from a record $1.04 trillion last Friday.
The Fed launched its reverse repo program (RRP) in 2013 to soak up extra cash in the repo market and create a strict floor under market rates, particularly its policy rate. Eligible counterparties lend cash to the Fed in return for Treasury collateral on an overnight basis.