Oddbean

US overnight funding rate hits highest since January ========== The US overnight funding rate, known as the Secured Overnight Financing Rate (SOFR), reached its highest level since January, hitting 5.4%. This indicates dwindling liquidity in the US repurchase agreement (repo) market. The increase in borrowing costs follows heavy Treasury coupon debt supply and the settlement of Treasury auctions, which strained banks' balance sheets. Analysts expect the rate to normalize in the coming days as the supply is digested, but caution that it may take longer due to the holiday-shortened week and reduced market liquidity. The spike in funding rates is reminiscent of the liquidity shortage in September 2019, which prompted the Federal Reserve to intervene by injecting liquidity into repo markets. The increase in the usage of the Federal Reserve Bank of New York's reverse repo facility, where money market funds lend to the Fed, also coincided with the jump in funding rates. This facility saw $664.6 billion in inflows, the highest level since January. The quarter-end pullback in balance sheet availability by banks looking to de-risk is contributing to the impact on liquidity. The situation highlights the reduced liquidity in the market compared to previous periods. #UsOvernightFundingRate #SecuredOvernightFinancingRate #Sofr #UsRepurchaseAgreementMarket #LiquidityShortage #TreasuryAuctions #FederalReserve #ReverseRepoFacility https://www.investing.com/news/economy-news/us-overnight-funding-rate-hits-highest-since-january-3505929