US TSYS/OVERNIGHT REPO: SOFR Jumps Post-Holiday, With Month-End Yet To Come
Secured rates saw a large jump Tuesday versus last week's unusually soft levels, with SOFR up 5bp (vs Friday, after Monday's holiday) to 4.31%. That brings SOFR back to levels last seen on May 15. Elsewhere, GCF Treasury Repo printed 4.38%, up 8bp and the highest since May 2.
- As we noted Tuesday, downward pressures on secured rates last week exerted in part by temporary GSE cash in the system was due to dissipate this week, and upside pressures are likely to persist toward week-end exacerbated by Friday's month-end dynamics.
- Other factors to watch include Friday's $46B in net new cash raised via coupon auction settlements (upward rate pressure), while Thursday's rates could be temporarily subdued in the meantime by $29B in net bill paydown (downward rate pressure).
- Effective Fed funds was as usual unchanged Tuesday (4.33%).
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.31%, 0.05%, $2655B
* Broad General Collateral Rate (BGCR): 4.30%, 0.04%, $1061B
* Tri-Party General Collateral Rate (TGCR): 4.30%, 0.04%, $1025B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $115B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $293B
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EQUITIES: US Cash Opening calls
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US: GOP Leaders Faces Toughest Test Yet As Reconcilliation Markup Begins
Republican-led House committees will tomorrow begin marking up the massive reconciliation package that GOP leadership hopes to pass in a party-line vote before Memorial Day. The package covers the bulk of President Donald Trump’s tax, border security, and energy agenda and is likely to include a roughly four trillion-dollar hike to the federal debt limit.
- For the first time, House Republicans will ink out the specifics of huge cuts to government services they outlined in broad strokes in their budget blueprint. The cuts, including USD$880 billion from the Department of Commerce, are likely to include major reforms to safety net programmes like Medicaid.
- So far, House Republican leadership has defied expectations, forcing a series of votes through a razor-thin majority despite warnings from conservatives over deficit spending in the reconciliation bill.
- This month’s mark-ups will be a more difficult lift for leadership. House Republican cuts are likely to go beyond what is palatable for House moderates and Senate Republicans and come as Trump’s sinking approval rating flashes warning signs for frontline Republicans.
- The Treasury Department is expected to send Congress its formal projection for the so-called X-date this week. As the reconciliation package includes a debt limit hike, the X-date will provide a hard backstop for getting the package through Congress.
- House Speaker Mike Johnson (R-LA) will meet Trump at the White House at 14:00 ET 19:00 BST to discuss reconciliation. The pair may discuss the prospect of a millionaire tax as a revenue source.
BONDS: Futures remain under pressure
- The small breakout of the 131.11 initial support noted in Bund for today has provided a round of selling in US Treasuries.
Ukraine's proposal of a ceasefire isn't really new, the country has always been willing to agree on a ceasefire. - The German contract is lacking momentum, and a clear break through the figure is needed to make an attempt at the next support of 130.75.
- For the US 10yr Yield, it has edged near 4.30%, but not really a Technical level.
- The initial area of interest is seen much further out, up to 4.4341%, this would equate to 110.07+ Today.
