Quiz: Repo rate correct

Chuckrox8

Responding to Quincy, Colombo said:

' The quality of collateral as well as short seller's positions affect the repo rate'

Is Colombo right?

(a) yes
(b) no only w.r.t quality is correct
(c) no only w.r.t short sellers' positions is correct

mcmc

Bad question... shorts in the market surely affect the repo rate, but the positions of the parties involved shouldn't.

I need to go to bed... this stuff is playing mind games with me.

mp3bu

It's A

In a big loop, short sellers needs affect the supply/demand of collateral which the lender requires.

So much for my acronym, which my scrabble-playing Grandmother came up with:

'Quad-Defects'.

I think of a fat repo man who's broken the wheels off a quad bike

Quality
Desirability
Delivery
Fed Funds rate
Credit quality
Term
Seasonal factors

bkballa

skillionaire Wrote:
-------------------------------------------------------
> Grrrrrrrr.................how the @#$%& could I
> miss this?
>
> I gotta stop drinking.......


You are 3 days early buddy.

PalacioHill

^^^^^hey easy with the black jokes man

NakedPuts2011

Grrrrrrrr.................how the @#$%& could I miss this?

I gotta stop drinking.......

liangfeng

A
1 the higher the quality of coll the lower the repo rate
2. the more the stock is shorted the more it is desirable as a coll and the lower the repo rate

liangfeng

wait a min are u guys saying the quality of the repo rate doesnt matter a la bear sterns?

bpdulog

My guess is yeah, but the conclusion is sort of a stretch. I guess its assuming the dealer needs to locate a lot of the security, more than they can find through securities lending, and have to find through repo. Then they would offer a lower yield to repo that security to lend to shorts?

The other is correct.

bodhisattva

Quality - no
SSPs - yes, because if there's a squeeze and you're holding the collateral, you can get a discount