Board of Governors of the Federal Reserve System

Figure 1. Stylized Illustration of U.S. Treasury Re-use

This diagram is a stylized illustration of how the collateral multiplier measures the amount of Treasuries dealers make available. A large green diamond on the left labelled “T” represents all of the Treasuries available to dealers. To the right, there are three T-accounts, each representing an individual dealer, where the leftmost (closest to the green diamond T) is the shortest, the middle diamond is medium-sized, and the rightmost is the tallest (the same height as the large green diamond T). Within each T-account, a blue rectangle on the right side labelled “R” represents that dealer’s secured funding. On the left side of each T-account, there is a green diamond labelled “P,” with an unlabeled blue rectangle underneath. The green diamond within each T-account represents that dealer’s holdings of Treasury securities, while the unlabeled blue rectangle represents that dealer’s secured financing. The height of the green diamond P and the unlabeled blue rectangle on the left sum to the height of the blue rectangle R on the right. There are arrows flowing from the large green diamond T on the left to the smaller green diamond within each T-account, demonstrating that the total supply of Treasuries is distributed among the dealers. There are also arrows from each dealer’s secured financing rectangle to the next dealer’s secured funding rectangle, representing transactions between dealers. For the rightmost, largest dealer, there are arrows pointing from the secured financing rectangle to the space outside of the diagram, demonstrating that this dealer is the only one obtaining financing from outside the dealer community. Finally, there is an ellipsis between the large green diamond T and the first T-account, demonstrating that there could be an indeterminate number of additional smaller dealers in the model, but they are omitted from the illustration.

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Figure 2. Outgoing UST Secured Financing Transactions

This figure shows the volumes of rehypothecated (black line) and non-rehypothecated (red line) outgoing UST secured financing transactions, from January to April of 2020. The black line shows that the rehypothecated volume stayed fairly stable around $950 billion during January and February, before rising sharply to a peak over $1100 billion during early March. It remained elevated in March, before falling back to its previous level in April. The red line shows that the non-rehypothecated volume stayed fairly stable around $225 billion during January and February, before rising sharply to a peak over $300 billion during early March. It remained elevated in March, before falling back to its previous level in April.

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Figure 3. Collateral Multiplier

This figure shows the total volume of UST secured financing transactions (black line) and the collateral multiplier (red line), from January to April of 2020. The black line shows that total SFT volumes stayed fairly stable around $1150 billion during January and February, before rising sharply to a peak over $1400 billion during early March. It remained elevated in March, before falling back to its previous level in April. The red line shows that the collateral multiplier started between 8 and 9 at the beginning of the year, and fell throughout January, before falling more sharply in late February and early March. After reaching a trough slightly under 6 in mid-March, the level increased throughout the rest of March and April, reaching a level of about 10 by the end of April. There are two even lines, the first of which marks the expansion of the Fed repo program on March 12, which coincides with the peak in the black line and the trough in the red line. The second line marks the expansion of Fed asset purchases on March 23, which is just before a sharp and sustained increase in the level of the multiplier.

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Figure 4. Share of Incoming UST Secured Financing Transaction by Product Type

This figure shows the percentage of UST secured financing transactions conducted through margin loans (yellow area), collateral swaps (green area), securities borrowing (blue area), and reverse repo (red area), from January to April of 2020. The proportion for each product type remains fairly stable throughout the sample, with the approximate share for each being: reverse repo at 75 percent, securities borrowing at 12 percent, collateral swaps at 12 percent, and margin loans at 1 percent.

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Figure 5. Share of Reverse Repo by Counterparty

This figure shows the percentage of UST reverse repo conducted with other counterparties (yellow area), bank counterparties (green area), other financial entity counterparties (blue area), and supervised non-bank financial entities (red area), from January to April of 2020. The proportion for each counterparty type remains fairly stable throughout the sample, with the approximate share for each being: supervised non-bank financial entities at 50 percent, other financial entities at 35 percent, banks at 5 percent, and other at 10 percent.

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