Steady Treasury Repo Highlights Strain in Equity Financing

The market for overnight Treasury repurchase agreements is showcasing resilience as mid-month liquidity dynamics push up overnight funding rates, a sharp contrast to the tougher conditions in equity financing.

The steadier tone in the segment of the repo market that’s backed by Treasuries reflects the depth of cash that’s still flowing into money-market funds and other short-term vehicles, supporting liquidity. That backdrop has kept financing orderly even as equity desks face firmer terms and more selective balance-sheet deployment around the middle of the month.

The imbalance has kept overnight Treasury repo rates near the bottom of the Federal Reserve’s target ...