Wall Street eased financing terms for hedge funds, private equity firms, insurers and institutional investors in the past three months, a Federal Reserve survey showed on Monday.
The Fed, in its June survey of senior credit officer opinion on dealer financing terms, said terms eased for credit on a broad spectrum of securities from equities and high-grade corporate bonds to non-residential asset-backed securities.
"Reasons cited as most important across the major classes of counterparties in explaining the easing of terms were more aggressive competition from other institutions and an improvement in general market liquidity and functioning," the Fed said.
The quarterly survey covers 20 of the largest financial institutions that do nearly all dollar-based dealer financing in securities markets and are the most active in the over-the-counter derivatives markets.
Most questions regarding derivatives showed little change from the March survey, but the Fed said a small fraction of dealers indicated that they had eased somewhat the initial margin requirements on trades for "plain vanilla" derivatives based on interest rates and credit.
The survey, in a special question, asked participants to gauge the use by various counterparties in financial markets against pre-crisis peaks and the post-crisis trough. Overall, a "large majority" of respondents reported that leverage was roughly in the middle between the peak and the trough.
"With regard to insurance companies, however, one-third of dealers noted that leverage was only moderately above the trough level," the survey said.
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