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US TSYS/OVERNIGHT REPO: SOFR Sees 2bp Of Passthrough From 5bp Fed Tweak

US TSYS/OVERNIGHT REPO
USBulletMarketsFixed Income BulletsNorth America

Thursday's rate run reflected the Federal Reserve's rate cut this week, with effective Fed funds falling 25bp to 4.33% as expected. Secured rates saw a bigger drop, reflecting the 30bp fall in the offer rate on ON RRP.

  • SOFR rates fell by 2bp more than the 25bp funds range cut, with BGCR down 4bp more and TGCR 5bp more. While there may also be some idiosyncratic factors at play that don't make these rates a pure measure of passthrough, these are roughly the degrees of passthrough expected from the 5bp ON RRP adjustment n the short term. Over time, SOFR is seen down slightly further (3-5bp of adjustment).
  • However, EFFR is not seen as being heavily impacted, if at all, by the ON RRP cut.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.30%, -0.27%, $2390B
* Broad General Collateral Rate (BGCR): 4.27%, -0.29%, $864B
* Tri-Party General Collateral Rate (TGCR): 4.26%, -0.3%, $827B
 

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Thursday's rate run reflected the Federal Reserve's rate cut this week, with effective Fed funds falling 25bp to 4.33% as expected. Secured rates saw a bigger drop, reflecting the 30bp fall in the offer rate on ON RRP.

  • SOFR rates fell by 2bp more than the 25bp funds range cut, with BGCR down 4bp more and TGCR 5bp more. While there may also be some idiosyncratic factors at play that don't make these rates a pure measure of passthrough, these are roughly the degrees of passthrough expected from the 5bp ON RRP adjustment n the short term. Over time, SOFR is seen down slightly further (3-5bp of adjustment).
  • However, EFFR is not seen as being heavily impacted, if at all, by the ON RRP cut.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.30%, -0.27%, $2390B
* Broad General Collateral Rate (BGCR): 4.27%, -0.29%, $864B
* Tri-Party General Collateral Rate (TGCR): 4.26%, -0.3%, $827B
 

Keep reading...Show less