Posted To: MBS Commentary
Based on the number of times members have searched the term “SLR” on MBS Live in the past week, we’ll go ahead and cover it here again. SLR = Supplemental Leverage Ratio. It limits the amount that banks can lend. In April 2020, the Fed made a temporary rule that allowed banks to take Treasuries out of that calculation (thus increasing the amount Treasury buying capacity in the market). The rule expires on March 31st. Many thought it would be extended. Today we learned that will not be the case. Bonds are reacting relatively well so far, but the day is young. If the initial reaction is any clue, it would seem to have been a very big deal for algorithmic and programmatic trading (the machines!) which reacted instantly with the highest minute of volume in months. But in the context…(read more)
