Toggle the reserve regime to watch how far the funding squeeze propagates: dealer balance-sheet capacity is the binding gate just as the reserve cushion goes away.

How fixed dealer balance-sheet capacity and drawn-down reserve balances gate how far a funding squeeze propagates Repo-market cross-section: Treasury issuance flows into a dealer warehouse capped by the supplementary leverage ratio, a hedge-fund basis trade draws repo demand, and reserve balances either damp the system or fail to when drawn down. Treasury debt marketable $5T → $25T collateral in basis trade ~$1trn repo long cash · short futures repo demand dealer balance sheet warehouse + finance SLR capacity cap capacity in use reserve balances dominant stabilizer ample drawn-down damping when ample repo stress 0 85th 100 spreads stay narrow leveraged fixed-income book insulated repo-squeeze chain 1treasury debt$5T → $25Tdealers flat · SLR 2basis complex~$1trntaxes capacity 3reserves smoothdominantstabilizer 4stressed tail>85th pctspreads widen 5no cushionbasis gap →leveraged book