Some money funds & banks refusing Treasuries maturing in next several weeks as repo collateral

[dkf]

@billmon1: "Some money funds & banks starting to refuse Treasury securities maturing in next several weeks as repo collateral." http://t.co/wjr6JqzfGZ

* Overnight repo rates jump to highest in five months

* Speculation some players refusing to accept some Treasuries

By Richard Leong

NEW YORK, Oct 9 (Reuters) - Growing worries about a possible U.S. default are spreading to a key part of the short-term credit market, sending overnight interest rates to their highest in five months on Wednesday.

Following the recent jump in interest rates on U.S. Treasury bills, banks and Wall Street firms are paying more to borrow in the repurchase agreement market, where they often pledge Treasuries as collateral in exchange for short-term cash to finance trades and loans.

Traders said some money funds and banks are starting to refuse to accept Treasury securities maturing in the next several weeks as repo collateral.

"Investors are worried about holding Treasury bills and coupon securities in late October through the middle of November, which may face delayed payments," said Boris Rjavinski, rates and rate derivatives strategist at UBS in Stamford, Connecticut.

[nadinbrzezinski]

1. WhT is a little nightmare before sleep?

[dkf]

2. Yeah I was feeling relatively sanguine til I read that.

Back to bad memories. It's a good thing I started learning about the workings of the banking system AFTER we had stabilized. While it happened I had no appreciation for the situation we were in.