PIPELINE: Corporate Bond Roundup: Issuers Sidelined Into Earnings

Secured rates rose sharply Monday, with SOFR rising 9bp to 4.51%. That was the highest rate outright and biggest spread to EFFR of 2025 so far (last exceeded in December 2024). 

• It's also notable that we saw the biggest takeup of the Fed's standing repo facility ($1.5B) Monday since end-June (which was a month- and quarter-end). That's reversed today with barely any SRF takeup.
• Monday's pressures were partly a result of an important tax date. It was probably also exaggerated by a net $78B Treasury coupon settlement, which should reverse to some extent Tuesday with just under $50B of net TBill paydowns due.
• Amid the funding market pressures as reserves wind down, however, attention turns to Wednesday's FOMC press conference, with some expectations that Powell could acknowledge that the Committee discussed ending QT in its 2 day meeting starting today (Goldman Sachs sees QT ending at the October meeting).

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.51%, 0.09%, $2877B
* Broad General Collateral Rate (BGCR): 4.50%, 0.1%, $1136B
* Tri-Party General Collateral Rate (TGCR): 4.50%, 0.1%, $1097B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $91B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $181B
 

Tuesday's Europe US rates/bond options flow included:

• RXV5 127.50p, bought for 10 in 3k
• ERH6 98.125/98.25/98.4375/98.625c condor, bought for 2.5 in 5k
• ERM6 98.3125c, bought for 4 in 10k total
• ERX5 98.00/98.0625/98.125/98.1875c condor, bought for 0.75 in 3.5k
• ERZ5 98.00/97.875/97.75p ladder, sold at 3.75 in 5k
• 2RX5 97.6875/97.8125cs vs 3RX5 97.5625/97.6875cs, bought the 2yr for 1.75 and 2 in 18k total
• SFIZ5 96.15/20/25/30 call condor bought for 0.5 in 3k
• SFIZ6 97.25/97.75cs x5 vs 96.25p x1, bought the cs for 3 in 1.75k (8.75k x 1.75k)
• SFIZ6 97.25/97.75cs, bought for 4.25 in 3.75k

EGBs and Gilts traded mixed Tuesday amid key UK data releases and ahead of the Fed and BoE decisions.

• Yields picked up in morning European trade, with Gilts weighed down in particular by firmer-than-anticipated aspects of the latest UK labour market report.
• Yields would peak in early afternoon after US retail sales data printed much stronger than expected, but would subsequently subside over the rest of the European cash session, as a pullback in equities renewed a bid for core FI.
• DMO announced a reduction in the size of 30Y Gilt auctions, helping the UK curve flatten toward the end of the session.
• Elsewhere in data, Euro area industrial production increased in July in line with expectations, while the September German ZEW survey's expectations component was much stronger-than-expected.
• The German curve twist steepened, with the UK's twist flattening with underperformance in the belly. Periphery/semi-core EGB spreads were little changed on the day.
• Wednesday's European calendar highlight is the UK CPI release (MNI preview here) though there will be global interest in the Federal Reserve meeting after the close as well as multiple ECB speakers (including Lagarde), with the BoE decision looming Thursday.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.6bps at 2.002%, 5-Yr is down 1.1bps at 2.285%, 10-Yr is up 0.2bps at 2.693%, and 30-Yr is up 1.5bps at 3.275%.
• UK: The 2-Yr yield is up 1.1bps at 3.964%, 5-Yr is up 1.8bps at 4.079%, 10-Yr is up 0.6bps at 4.639%, and 30-Yr is down 0.9bps at 5.453%.
• Italian BTP spread up 0.1bps at 78.5bps / French OAT spread up 0.5bps at 79.6bps