BMO FICC wrote Thursday......>

US TSYS/OVERNIGHT REPO: BMO FICC wrote Thursday (ahead of this announcement), re

client Qs on whether the Fed would increase repo ops rate: "The short answer is

'not yet, at least not before quarter-end'. Doing so would further

disincentivize usage of the facility at a moment where funding conditions are

experiencing a partial squeeze due to the huge bill supply and the elevated TGA.

To raise the rate this moment would be self-defeating and counter-productive."

- Since the April FOMC, "rather than seeing funding conditions ease, we've seen

an upward trend in bill and repo rates, as well as increased take-up in the repo

facility (largely driven by MBS rates as tri-party UST repo rates have remained

below the repo facility). This should largely be seen as a positive - after all,

the whole purpose of the sitting repo facility is to provide reserves and absorb

some of the collateral glut weighing on dealer balance sheets."

- Also, Citi pre-FOMC said while repo adjustment "seems to make sense eventually

as markets return to normal, it may not be the best time to experiment due to

the strain already showing up in repo markets as the ongoing Treasury bill

supply appears to have reached a 'biting point' over the past couple of weeks."