Market Pressures Persist as SOFR Futures Trading Increases

According to Odaily, the lack of direct response to recent market pressures has led to increased trading in SOFR futures against the federal funds rate, while other rates in the repo market remain elevated. Wall Street strategists warn that financing pressures will continue until November as reserves decline and more Treasury bills are issued, injecting collateral into the market. Mark Cabana, head of U.S. rate strategy at Bank of America, stated that ongoing pressure will eventually force the Federal Reserve to inject additional liquidity before its December meeting. "The Federal Reserve's decision to hold off on liquidity operations may be due to its belief that current financing pressures are temporary," Cabana wrote in a report to clients. "However, we consider this unlikely. As quantitative tightening continues, financing pressures are likely to persist and intensify."