UK DMO SAYS TBSRF IS LIKELY TO BE PRICED AT 20 BPS BELOW BOE BANK RATE, SUBJECT TO REVIEW

The UK Debt Management Office has indicated that the Treasury Bill Stock Repo Facility (TBSRF) is likely to be priced at 20 basis points below the Bank of England's Bank Rate, although the terms remain subject to review. The mechanism at work is the pricing of short-dated sterling funding: a facility priced below Bank Rate lowers the cost of borrowing against gilt-type collateral, which can ease repo rates and tighten the spread between secured overnight funding and the policy rate. Money market funds, banks and dealers that rely on repo financing are the most directly exposed, as the level of the facility sets a reference point for the cost of collateralised cash across the short end of the sterling curve. Short-sterling and SONIA-linked instruments may also reprice modestly if the facility is seen as anchoring secured funding costs below policy rates. Traders will watch the formal confirmation of pricing and any revised terms from the DMO and the Bank of England, along with subsequent sterling overnight repo rate prints relative to Bank Rate to judge whether the facility is shifting funding conditions in practice.

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