Finadium: The Repo/LIBOR Flip and what it means for the markets

A new report from Finadium investigates why the historical repo/LIBOR relationship has reversed, what it means, and who can really get what rate in the open market.

Repo and LIBOR have reversed their historical pricing relationship: repo, an observed secured short-term trade, is now more expensive than LIBOR, a theoretically priced unsecured loan transaction. The retail analogy is if credit card debt was less expensive than a home mortgage for the same borrower. This is an awkward situation that should not exist but does, and is the result of historical practice, regulatory cost pressures and the difficulty of reforming LIBOR.