Overview
- The Secured Overnight Financing Rate is the ARRC-endorsed benchmark for overnight Treasury‑collateralized repo and is calculated daily by the New York Fed from tri‑party and GCF repo transactions.
- Reports this week show SOFR trading above the effective federal funds rate, a rare inversion that points to heightened demand for cash and high‑quality collateral.
- Market watchers cite sharply lower balances in the Fed’s overnight reverse‑repo facility and increased use of the Standing Repo Facility, with one report noting a $6.5 billion SRF draw and a 29‑basis‑point SOFR–RRP spread outside quarter‑end.
- Analysts characterize the move as reduced reserve elasticity and uneven liquidity distribution rather than a systemic crisis, though it elevates the risk of funding volatility.
- If the pattern endures, a higher SOFR would act as de facto tightening and could influence expectations for the timing of Federal Reserve easing, according to market commentary.