Zestt

its not the repo dealer's job to get that security...It's considered hot because if you were to take out a repo loan, and you had the choice of giving him some crap collateral or more liquid collateral, he will prefer the latter. Hence, he should pay for this "hotter" security by lowering his rate for you.

thommo77

I guess I am not really questioning whether Schweser is correct or not in this case - presume they are.

I am obviously missing something wrt UST being hot. If it's the most liquid, easily available security, not something that's hard to get your hands on, then why would be considered hot?

susana

on the run treasuries are the newly issued securities, so they tend to be more liquid...that's why they're considered hot....when you use hot collateral in a repo, the dealer demands it more, so theyre willing to provide a lower repo rate.

I know we started a discussion on this not too long ago, any verdict on whether the above is correct?