Per Wrightson ICAP, the......>

US TSYS/OVERNIGHT REPO: Per Wrightson ICAP, the Fed may have seen several

advantages to adjusting the minimum repo bid rate now, instead of tweaking IOER:

- Taxpayer friendly (Fed gets paid an extra 5bps on O/N, vs paying an extra 5bps

on $3trn in reserves); Reduces Fed's market footprint; Consistent with tradeoff

in other COVID programs between making it affordable but not too generous.

- Also makes ops more of a "backstop facility", which Fed is prob moving toward

anyway. On this point, Fed may raise repo bid rate another 5bps this year.

- The rate adjustment will mean lower dealer demand for Fed repos. Wrightson

notes Fed RPs outstanding fell to 3-mo low of $127bln Friday; might bounce today

but by Tuesday likely to fall below $100bln for the first time since Sep 23 and

by Jul 7 to fall to "negligible" levels.

- Banks should step in, as they "have much larger reserve positions than they

need for intraday liquidity management purposes, and will be happy to divert

cash into overnight RPs at slightly higher rates." Wrightson expects Treasury

GCF rates to fluctuate around 0.14-0.15% for the rest of June (vs 0.12% in first

half of the month).