US TSYS/OVERNIGHT REPO: Secured Rates Continue To Tick Up With Month-End Ahead
Secured rates rose for a 2nd consecutive session Wednesday, with SOFR up 2bp to 4.33%, adding to the 5bp rise prior.
- That brings SOFR back up to the level of effective Fed funds for the first time since May 5.
- Secured rates rates could be temporarily subdued today by $29B in net Treasury bill paydowns. However, upside pressures are likely to persist toward week-end exacerbated by Friday's month-end dynamics and $46B in Treasury net new cash raised via coupon auction settlements.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.33%, 0.02%, $2605B
* Broad General Collateral Rate (BGCR): 4.32%, 0.02%, $1049B
* Tri-Party General Collateral Rate (TGCR): 4.32%, 0.02%, $1020B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $108B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $282B
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EUROZONE DATA: Industry Capacity Utilisation Remains Below 2000-2019 Avg
The EC’s April survey also contained quarterly questions on capacity utilisation in industry and services. Eurozone industrial capacity utilisation rose to 77.7%, but remains comfortably below the 80.9% 2000-2019 average, as it has been for the last two years. That’s nonetheless the third consecutive increase in capacitiy utilisation – a tentative sign that Eurozone industry was bottoming out, at least until April's US tariff reciprocal developments took centre stage.
- The share of respondents reporting insufficient demand as a constraint on production fell to 34.8% (vs 37.4% prior). Meanwhile, the share referencing financial constraints ticked up slightly to 5.2% (vs 4.9% prior).
- 15.2% of respondents referenced labour shortages as a limiting factor (vs 15.5% prior), while 8.4% referenced a shortage of materials (vs 9.7% prior),
Services capacity utilisation fell to 89.3% from 90.2% prior, remaining just above the 2000-2019 average of 89.1%.
- This was driven by an increase in the proportion of respondents referencing insufficient demand as a factor limiting production (32.6% vs 30.0% prior). This may be another example of tariff-related uncertainty spilling into broader Eurozone demand, even if the direct impact of tariffs centres on industry/retail sectors.
BONDS: Yesterday's High In TY Futures & Low in U.S. 10-Year Yield Limit Rally
Yesterday’s high in TY futures & low in 10-Year Tsy yields held during the initial bond rally that followed the White House critique of Amazon and subsequent sell off in equities, limiting the wider bond rally.
US TSY FUTURES: BLOCK: Large Jun'25 2Y/10Y Ultra-Bond Flattener
- Large curve flattener Block crossed at 0852:04ET, runs counter to better steepener flow last several sessions:
- -39,400 TUM5 103-29, sell through 103-29.62 post time bid vs.
- +17,000 UXYM5 114-08.5, bough through 114-08 post time offer
- Appr DV01 $1.5M
