Surging gross repo costs highlight US dealers’ divergence on netting
Lack of offsetting in GAAP presentation leads BNY and Northern Trust to report paying double- or triple-digit rates on fed funds, repos
BNY and Northern Trust reported paying 117% and 59%, respectively, in annualised interest on federal funds and repos before netting in Q4 2024 – an accounting-induced distortion that nevertheless suggests a different approach to netting compared to other dealers.
Accessing the overnight interbank markets had cost the custodians virtually nothing until Q4 2021, as the US Federal Reserve held the cost of money at all-time lows.
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