is on-the-run us treasuries considered limited availability collateral

Hi Question 17 volume 2 exam 2 schweser 2013 mock is considering on-the-run us treasuries considered limited availability collateral. Therefore making option c correct But are they collateral with limited availability?

anyone

yes, at least they are better than off the run so the rate is going to be better because they are more liquid

They’re not limited, treasury lines are massive. They are hot in the sense that they are more liquid so are preferred by the lender (so you pay a lower rate).

OP, you sure they are not just saying “lower repo rate” because of high quality collateral? I guess one of the indications of quality would be high liquidity (low liquidity premium in case the lender has to liquidate their position).

This one also confuses me earlier (if you after refering to repo rate here).

There are two aspects to the collateral and repo rate relationship you need to know

  • increase in quality of collateral => reduced repo rate - limited availability of collateral => reduced repo rate