Rates for borrowing and lending securities in the repurchase-agreement market rose Friday and investors sought to extend maturities on concern power outages and closings of mass transit would keep traders home after Hurricane Irene struck.
Overnight general collateral Treasury repurchase, or repo, rates, opened at 0.10% and traded at 0.13% at 10 a.m. New York time, according to data from ICAP PLC, the world's largest interdealer broker.
Securities dealers use repos to finance holdings and increase leverage. The majority of repo transactions take place on an overnight basis, with those current funding positions maturing on Aug. 29. Diminished staffing and computer-related problems following the hurricane may make it difficult to roll over such transactions.
"Traders want to fund some of their positions through Tuesday — expecting some co-workers might be out on Monday — to ease the funding burden in case they are short-staffed," said Scott Skyrm, senior vice president and head of repo and money markets at NewEdge USA LLC in New York.
Securities that can be borrowed at interest rates close to the Federal Reserve's target rate are called general collateral.
Those in highest demand have lower rates and are called "special." The average level of overnight general collateral repo rates traded through 10 a.m. New York time Friday with ICAP was 0.06% Friday, up from a 0.05% average Thursday, and 0.01 % the day before that.
