The rate for borrowing and lending Treasuries surged as banks reined in collateral lending to shore up balance sheets and those needing financing at quarter-end were forced to pay higher prices.
The peak level Tuesday for financing Treasuries overnight in the repurchase-agreement market, relative to unsecured lending rates, reached the widest since July 2009, according to Barclays Plc. The average cost for this funding, known as general collateral repo, averaged its highest in the morning trading since October 2012, according to ICAP Plc.
Short-term interest rates have traded at historically low levels with the Federal Reserve holding its federal funds target rate at virtually zero since December 2008 to bolster economic growth. The relatively higher levels reached Tuesday aren't forecast to persist past the end-of-quarter period.
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