Re: The Repo Market Time Bomb

[stan jonas <joco@xxxxxxxxxxxxx>]

thereare acronynms and there are acronyms..

But there are certain things that distinguish a diletante from a serious
contender..
by the way I would worry about your supposed expert as well..

Before i reveal what G/C is and give you a good reference.. this thread sounds
more  and more like the pop science one keeps reading about in the N.Y.
Times...at some stage one owes it to oneself to do the hard work before making
judgements.. its sort of like people blabing about General Relativity who don't

know anything about differential geometry.. at some stage the Clff's Notes
version just won't do...

G/C  is general collateral.. the Repo market is differentiated between the
general financing levels, and the real rationale for Repo its a borrowing
mechanism for securities that enables dealers and other to go short securities
that they don't own..

When one seeks to finance or "reverse in" a specific security.. the financing
rate is a "special" rate.. one that takes into acount the specific supply
demand fundamentals of that issue...

The key is to recall that one man's borrowing is another's lending...the repo
market can best be thought of as a forward buy and sell marketplace.. repo is
used as a term of art to avoid the tax and accounting consequences of buying
and selling... work it out a repo is nothing else but a sell/buy back
transaction...but collateralized...

As an aside it was the "invention' of repo in the early 1960's that made the
U.S.fixed income markets the leading ones in the world.... a country's march to

financical efficiency can be measured by the depth of its repo marketplace..

for more see Darell Dufie's excellent review in the Journal of Finance or  on
his
web site at Standford...

"Henry C.K. Liu" wrote:

> stan jonas wrote:
>
> >
> > Simple supply and demand pressures will move the two rates to either side
> > of a clearly defined arbitrage band.. but a good assumption is that G/C
> > .. (..if you don't know what this is, you shouldn't talk about repo to
> > begin with).trades
> > about 5 basis points beneath the effective Fed Funds rate.
>
> I don't know what G/C (government/commercial?) is and I started this thread
> on repos.  I personally do not trade, although I think I know a bit about
> repos. I employ traders.
> But the purpose of participating on a list is to exchange ideas and
> information rather than showing off with one-upmanship.  One hopes to learn
> as well as to sharpen one's thoughts through being challenged and by
> challenging the ideas of others.
> It would be more useful if you would identified what "G/C" stands for,
> instead of merely using it to buttress your credibility.
> I recently asked a top expert on structured finance what a NIMS is and he
> did not konw, and it does not lower my respect for him.  (They are "net
> interest margin securities".)
>
> Henry C.K. Liu