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2025-09-30 19:55:17
[Quarter-end Funding Surge: Fed Repo Facilities Provide Emergency Assistance] ⑴ Quarterly settlement pressure caused the secured overnight financing rate to jump 10 basis points to 4.33% at the opening on Tuesday, but it subsequently fell back to 4.28%, with a single-day fluctuation of 5 basis points. ⑵ US Treasury bond settlements triggered a $98 billion cash outflow, which, combined with the massive long positions built up in anticipation of a Fed rate cut, pushed up financing costs. ⑶ Since last Thursday, the market has exhibited a consistent pattern of "opening strong and then falling late in the day." The current rate is 4 basis points above the 10-day average of 4.24%, approaching the overnight low of 4.09% on September 29. ⑷ The Federal Reserve will launch a $50 billion repo operation at 1:30 a.m. on Wednesday, with the execution rate anchored at 4.25%, aimed at smoothing month-end liquidity fluctuations. ⑸ Overnight reverse repo demand surged due to month-end effects, reaching $56.22 billion on September 29, a 17% increase from the previous day. ⑹ Treasury yields across different maturities diverged, with 10-year and 20-year bonds trading 13 and 20 basis points below the secured overnight financing rate, respectively, while short-term bond yields remained unchanged. ⑺ Federal Funds futures data indicate that the market's expectation of a 25 basis point rate cut in October has reached 91%, with the one-month term repo rate at 4.266%. ⑻ Short-term interest rate derivative pricing reflects that the market has fully priced in the expectation of a rate cut this year, with the 0x3 overnight index swap rate trading 32.6 basis points below the secured overnight financing rate.
