What is important for policymakers, however, is to understand whether these conditions are likely to prevail and whether they could affect the transmission of monetary policy or bear risks for financial stability. Spillovers from the repo market and securities lending Before I give tentative answers to these questions, allow me to briefly address another market segment, which is different but related.
Historically, not only did safe bond yields and OIS rates trade closely together, the same was also true for rates on repurchase agreements (repo). Recently, repo rates, too, have come to trade significantly below OIS rates, which raises the question of whether repo rates might be contributing to the drop in short-term bond yields.