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2026-05-27 19:33:29
[US Repo Rates Hold Steady at 3.69%, Poised for $15 Billion and $47 Billion Outflows, Month-End Funding Pressures Emerging] ⑴ The US general secured repo rate opened flat at 3.69% on Wednesday, 12 basis points higher than the 10-day average of 3.57%. The failure of rates to fall indicates that the collateral market is preparing for outflows of up to $15 billion and $47 billion on Thursday and Friday, respectively, while month-end funding pressures are also building. ⑵ The US Treasury announced yesterday that it would cut Treasury issuance by $30 billion. Therefore, after this week's rise in repo rates, rates may fall in the coming weeks as the outflows cease. The Treasury stated in its quarterly funding announcement that the Treasury issuance cuts will continue until mid-June. The general secured repo rate is expected to trade between 3.69% and 3.64%. If overnight rates decline, the 10-day average of 3.57% will act as resistance. (3) The spread between 2-year Treasury bonds and general secured repo rates widened by 10 basis points to 29 basis points, indicating increased demand for this maturity. Demand for 10-year and 20-year bonds decreased by 6 and 5 basis points respectively to 16 and 9 basis points. The overnight reverse repo operation volume increased from $970 million last Friday to $1.79 billion on Monday, with the number of participating institutions increasing from 5 to 6. Pricing of the overnight index swap 0x3 maturity indicates a 38% probability of a 25 basis point rate hike within the next 90 days. Secured overnight financing rate futures prices rose across the board by 1.5 to 3 basis points, corresponding to a 4% drop in spot crude oil prices.
