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2026-05-29 20:49:05
[Month-end capital outflows weigh on overnight repo rates, opening higher at 3.69%, continued pressure on US Treasury financing] ⑴ The overnight general secured repo rate opened 3 basis points higher on Friday to 3.69% for buyers, primarily driven by the re-issuance and settlement of 2-year floating-rate notes and 10-year Treasury Inflation-Protected Securities, resulting in approximately $43 billion in cash outflows. ⑵ Settlement of 2-year, 5-year, and 7-year Treasury notes on Monday will bring another $68 billion in outflows, with approximately $16 billion in Treasury bill settlements expected on Tuesday. Therefore, a significant drop in overnight rates is not anticipated. ⑶ Repo rates are expected to trade between 3.69% and 3.64%. After afternoon repo operations, the overnight rate may stabilize around 3.70% before Monday's settlement. If it breaks through 3.64%, the 10-day moving average of 3.55% will become a resistance level. (4) Except for the 3-year Treasury bond, premiums across all maturities ranged from 6 to 14 basis points, reflecting widespread hedging activity due to falling prices. Federal funds futures indicated a 94% probability of no rate hike at the June Fed meeting. (5) Short-term overnight index swap pricing showed a 33% probability of a 25 basis point rate hike within the next 90 days. SOFR futures fluctuated narrowly, unaffected by the 1.7% drop in spot oil prices.
