Here’s what to watch for further signs of funding strains in the coming days:
Secured Overnight Financing Rate SOFR is a reference rate connected to transactions of overnight repurchase agreements. When funding costs rise it tends to drive SOFR higher as well. SOFR fixed at 5.35 per cent as of December 26 from 5.32 per cent the prior session, according to New York Fed data published Wednesday. That’s off the all-time high of 5.39 per cent reached on December 1.
Reverse repo facility The Fed’s reverse repo facility, or RRP, has been a place where counterparties – mostly money-market mutual funds – can park excess cash to earn a market rate, currently 5.3 per cent. As banks pare their repo market activity to tidy up their balance sheets, it spurs money funds to shift more cash to the RRP. On Wednesday, 90 counterparties parked $US819 billion ($1.2 trillion) at the facility, the most since December 13.
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