Federal Reserve Vice Chair for Supervision Michelle Bowman publicly credited the enhanced Supplementary Leverage Ratio reform with improving Treasury market functioning, noting that banks have deployed expanded balance sheet room to increase Treasury holdings. The eSLR change, long sought by primary dealers and large banks, removes low-risk assets like Treasuries and reserves from the leverage denominator, freeing capacity that was previously constraining intermediation.
For Armada's traditional repo desk, this is structurally meaningful. Greater dealer willingness to warehouse Treasuries reduces fails risk, tightens bid-ask spreads, and supports more robust repo market depth. Counterparties including banks and primary dealers operating under looser SLR constraints may offer more competitive repo terms, and mid-quarter balance sheet stress events should be less acute going forward.