To reconstruct a swap spread trade and assess its risk, a regulator would simultaneously need to see the cash Treasury position, the repurchase agreement (repo) financing, and the interest rate swap. No regulator today sees all three.
Vanderbilt Law School professor and associate dean Yesha Yadav made that point to the U.S. House Financial Services Committee Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity. She described Treasury securities as the “collateral backbone” of the derivatives and repo markets, and Treasuries, in turn, as “the uncontested safe asset in the global economy.”
But volatility bouts such as the March 2020 “dash for cash” and a 60 basis-point jump in 10-year Treasury yields in April 2025, along with concerns being raised by systemic-risk overseers including the multinational Financial Stability Board (FSB) about risks and the availability of analytics to manage them, underline and amplify Yadav’s warning.
Yesha Yadav
“Despite the depth of these interdependencies,” said the professor’s April 29 testimony, “our knowledge of the risks at the intersection of derivatives and Treasury markets is surprisingly thin.”
Yadav called attention to cutbacks at the U.S. Treasury Department’s Office of Financial Research {OFR}, which gathers data to support the Financial Stability Oversight Council’s monitoring of financial and economic conditions and has been a definitive source of repo market metrics.
“It is unclear at this point what role FSOC is prepared to play in providing an overarching data architecture for monitoring risks,” Yadav asserted. “Its ability to function as a coordinating body depends on having institutional infrastructure and data capacity, and especially in light of the complex interconnections between the Treasury, Treasury-backed repo and related derivatives markets.
“These institutional limitations mean that at the very moment when derivatives-Treasury interconnections are deepening, the infrastructure designed to monitor those interconnections is losing capacity. This is the backdrop against which the expansion of central clearing and cross-margining is taking place.”
Source: Financial Stability Board
A February FSB report went into structural vulnerabilities in government bond-backed repo markets – such as buildups in leverage fueled by repo financing – and interlinkages between government bond and repo markets that can transfer volatility from one market to another.
The FSB discussed four broad surveillance metrics categories to identify repo-market vulnerabilities: market activity, market structure, resilience and intermediation capacity.
“The biggest challenge is getting the data right,” said Greg Feldberg, a Yale School of Management lecturer who worked for six years at the OFR. “There’s been a lot of progress made in the data, but we still don’t have the ability to analyze some of the key risks.”
Risks identified by the FSB are consistency in obtaining the size of repo markets across jurisdictions; differences in the detail and granularity of available data; significant lags and, simply, lots of missing data. The report pointed to 10 policy proposals published in January 2025 by the Basel Committee on Banking Supervision (BCBS) and related bodies “to increase the resilience of the centrally cleared market ecosystem in times of market stress.”
Despite the attention to closing data gaps, the FSB noted continuing difficulties, including collecting data on central counterparties’ (CCPs) repo-transaction margins in all jurisdictions, and gauging how haircuts reducing securities’ market values are being applied.
“Overcoming this aspect would allow members to undertake robust monitoring of the level of resilience in the repo markets particularly around credit related vulnerabilities and procyclical effects,” the report said.
Concerns laid out by the FSB have largely been discussed in various forums, said Richard Berner, professor emeritus and co-director of the Volatility and Risk Institute at the NYU Stern School of Business.
Berner, who was the OFR’s first director, from 2013 to 2017, said of repo, “It’s much broader now, and there is more exposure, with the same vulnerabilities that haven’t been fixed.”
Data in an April 9 OFR blog showed total daily average repo value from July 2025 to February 2026 of $12.75 trillion (table below), consisting of tri-party, cleared, and non-centrally cleared bilateral repo (NCCBR). A source of transaction-level NCCBR data was lacking prior to a 2024 data collection rule.
In the June 10 announcement of the launch of the ISDA-Actrix U.S. Treasury Repo Market Clearing Indicators, the International Swaps and Derivatives Association said that between May 2023 and April 2026, average daily volume of cleared repo doubled; sponsored cleared repo activity (38% of the total in April) grew 249%; sponsored cleared bilateral repo increased 191% and sponsored cleared triparty repo 583%; and direct cleared repo (typically by dealers that are direct clearing members) rose 61%.
Broadridge Financial Solutions, one of several organizations mentioned in a May 12 Bloomberg article that are part a growing, though still early-stage, “push into tokenized repo,” said its Distributed Ledger Repo processed $7.2 trillion in May. The average daily volume of $362 billion was 220% higher than in the year-earlier month, “underscoring the continued adoption of tokenized real-asset settlement and the growing role of distributed ledger technology as a scalable solution for capital markets.”
In another demonstration of repo onchain, stablecoin infrastructure company HiFi announced June 17 the completion of a transaction with DRW on Digital Asset’s Canton Network. Marex acted as prime broker, and the trade was executed on Tradeweb using a request-for-quote (RFQ) protocol.
The ability to settle continuously and in real time improves firms’ balance-sheet efficiency, said the announcement, adding, “The shift is particularly significant for financial institutions outside the U.S., which hold dollars and U.S. Treasuries but operate in time zones where U.S. markets are closed for much of the business day. Onchain repo enables these institutions to access dollar funding and mobilize Treasury collateral outside traditional U.S. market hours.”
At its quarterly meeting in May, the Treasury Borrowing Advisory Committee (TBAC) discussed the possibility of investing excess federal cash “in the overnight Treasury repo market to generate investment returns while maintaining prudent risk management and avoiding market disruptions,” according to the published minutes. They concluded “that additional study is warranted regarding operational and implementation considerations.”
Greg Feldberg
Feldberg said the U.S. has a “pretty good handle” on repo data issues, because authorities can draw on both transaction-level trade data and what institutions engaged in the market report. Most other jurisdictions rely mainly on transaction-level data.
Feldberg referred to a March 2026 OFR brief that combined NCCBR data with OFR transaction-level and tri-party settlement data to segment market participants by type, identify net borrowers vs. lenders, and provide other previously unavailable insight.
“Other countries also collect detailed data, but important gaps remain around market structure and interdependencies,” Feldberg noted. “It makes these risks hard to monitor.”
U.S. Treasury- and derivative-market interdependencies can still fuel significant volatility. The cash-futures basis trade, for example, involves the simultaneous sale of Treasury futures and purchase of cash Treasury securities, financed via the repo market. The March 2020 stress prompted highly leveraged hedge funds to sell cash and repo positions to meet margin calls and roll over their repo loans, draining liquidity from the Treasury market.
Hedge fund gross repo cash borrowing (Financial Stability Board report, page 33).
“In a fundamental sense, the stability of derivatives markets depends on the stability of the Treasury market, and derivatives activity in turn affects Treasury market conditions,” Yadav stated
However, the OFR’s bilateral-repo data collection rule may be undermined by the bureau’s staff cuts, said the Vanderbilt professor, adding, “When hedge funds’ repo borrowing is intermediated by multiple dealers, no entity is aggregating the total repo-financed leverage of a given fund across all its counterparties.”
The regulatory mandate to centrally clear Treasury bonds by year-end 2026 and Treasury repos by mid-2027 will help, but comprehensive aggregation remains elusive. Berner said that under his watch the OFR sought to increase data sharing among market participants and regulators, “but in our fragmented regulatory structure, that proved extremely challenging, and it remains so today.”
As Yadav sees it, Treasury market oversight is divided among at least five federal bodies without a lead regulator. The regulatory fragmentation hindered interagency investigative efforts following the October 2014 Treasury-market “flash rally.” A memorandum of understanding this March between the Securities and Exchange Commission and Commodity Futures Trading Commission may be a portent of improved data sharing.
The fact that their “data-sharing infrastructure . . . is still being formalized in 2026 tells us something about the pace of institutional reform relative to the pace of market evolution,” Yadav said.
Jeffrey Kutler of GARP contributed reporting for this article.