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US TSYS/OVERNIGHT REPO: SOFR Remains Stubbornly High

US TSYS/OVERNIGHT REPO
USBulletMarketsFixed Income BulletsNorth America

Secured rates have been sticky to the upside over the past few sessions. At 4.64% (up 1bp), the SOFR fix printed 6bp above Fed Funds on Tuesday, widening the SOFR-EFFR spread for a 3rd consecutive session (EFFR has remained steady at 4.58%), with SOFR-ON RRP at 9bp and SOFR-IORB at -1bp.

  • The 75th minus 25th SOFR percentiles rose 2bp to 11bp (highest since Dec 2) with 99th minus 1st up 2bp to 20bp.
  • These are figures not often seen over the past few years outside of some quarter-/year-end dates when funding markets typically come under pressure, and that's before next week's mid-month Treasury settlements and corporate tax payment date.
  • These are not necessarily alarming developments, and SOFR is still expected to fade by later in the month - but they underscore some underlying tensions in funding markets that have been bubbling up in the past couple of months.
  • Fed officials have expressed that they are unconcerned that reserves are becoming scarce, but an end to QT is likely to be a topic of discussion at meetings in early 2025.

REPO REFERENCE RATES (rate, change from prev. day, volume):

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Secured rates have been sticky to the upside over the past few sessions. At 4.64% (up 1bp), the SOFR fix printed 6bp above Fed Funds on Tuesday, widening the SOFR-EFFR spread for a 3rd consecutive session (EFFR has remained steady at 4.58%), with SOFR-ON RRP at 9bp and SOFR-IORB at -1bp.

  • The 75th minus 25th SOFR percentiles rose 2bp to 11bp (highest since Dec 2) with 99th minus 1st up 2bp to 20bp.
  • These are figures not often seen over the past few years outside of some quarter-/year-end dates when funding markets typically come under pressure, and that's before next week's mid-month Treasury settlements and corporate tax payment date.
  • These are not necessarily alarming developments, and SOFR is still expected to fade by later in the month - but they underscore some underlying tensions in funding markets that have been bubbling up in the past couple of months.
  • Fed officials have expressed that they are unconcerned that reserves are becoming scarce, but an end to QT is likely to be a topic of discussion at meetings in early 2025.

REPO REFERENCE RATES (rate, change from prev. day, volume):

Keep reading...Show less