Repo Runs: Evidence from the Tri-Party Repo Market

Abstract

The repo market has been viewed as a potential source of financial instability since the 2007 to 2009 financial crisis, based in part on findings that margins increased sharply in a segment of this market. This paper provides evidence suggesting that there was no system-wide run on repo. Using confidential data on tri-party repo, a major segment of this market, we show that, the level of margins and the amount of funding were surprisingly stable for most borrowers during the crisis. However, we also document a sharp decline in the tri-party repo funding of Lehman in September 2008.