Pricing and funding pressures hit gilt repo dealers
QT-driven funding cost rises combined with clients’ price demands see at least two banks pull back
Some banks have begun to step back from offering balance sheet capacity for gilt repo, as increased funding costs clash with increased demand for cheap pricing from real money clients.
After the Monetary Policy Committee voted to reduce the Bank of England’s stock of gilts in February 2022, the central bank has been steadily reducing the excess liquidity brought about by the Covid-era of
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