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Brainard Eyes Standing Repo Facility; Mkts React To "Valuations Elevated"


Fed Gov Brainard's speech on Financial Stability (out at 0905ET) outlined potential future regulatory reforms to make markets more resilient to shocks such as those in March 2020.

  • Such reforms could include standing facilities to backstop repo operations in stress conditions; possible central clearing for Treasuries; . These have been discussed previously (see MNI article in January on the case for a Standing Repo facility).
  • Treasuries briefly ticked higher (see arrow in chart below) and equities dipped lower on the text release, though moves were subsequently erased.
  • The brief risk-off move is more likely to do with her comment "valuations are elevated in a number of asset classes relative to historical norms" rather than on various possible faciltiies being introduced in future which would likely have impacted on other market variables (eg swap spreads which didn't move).

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