Don’t count on repo to monetise liquidity books, say experts

QT could force banks to sell bonds during stress, underlining need for fair value accounting

Getty Images

Banks should not rely on being able to raise cash from their bond books during stress events via repurchase (repo) markets, experts have warned. This risk underscores the need for banks to hold adequate amounts of available-for-sale securities in their liquidity books that are marked at market value, in case they need to be sold outright.

“On a go-forward basis, I do worry about this, because the underlying market dynamic will really change,” said Mark Cabana, head of US rates strategy at Bank