OFR Short-term Funding Monitor - Market Digests


The tenor of a financial contract refers to the amount of time before that contract expires. Tenor aggregates can be used to examine the provision of funding over different time horizons. These charts present insights into the tenor of financing across various short-term funding markets.

Tri-party repo transaction volume by tenor

Transaction volume in tri-party repo market broken out by tenor

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In tri-party repurchase (repo) transactions, participants know their counterparty, but transact against classes of collateral, rather than specific securities. As a result, tri-party repo is used only for financing, and not for obtaining specific securities. A custodian, usually a bank, maintains post-trade processing activities such as collateral selection, payments and deliveries, custody of collateral securities, and collateral management. Borrowers in tri-party repo tend to be larger dealers to which cash lenders are willing to be directly exposed.

This chart shows a breakdown of tri-party transactions by the repo's tenor, which is the amount of time between the initial trade of cash for securities and the repurchase of those securities. Financing needs can vary by time horizon, leading to demand for loans of a different tenor. Shorter-tenor trades maximize lenders' liquidity, typically reducing rates borrowers have to pay. However, borrowers in shorter-tenor trades carry the risk that financing rates increase or that financing becomes unavailable, which is referred to as rollover risk. Examining volume across tenors provides a window into the availability of and demand for financing across time horizons. In periods of high volatility, longer-tenor trades can provide more stability to borrowers, but during these times it may also be difficult for lenders to extend credit at longer horizons.

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Suggested Citation

Office of Financial Research, “OFR Short-term Funding Monitor,” refreshed daily, https://www.financialresearch.gov/short-term-funding-monitor/ (accessed ).