Strategist: The Fed to Finally Add Liquidity Ahead of December Meeting Due to Ongoing Pressure
BlockBeats News, October 31st, the absence of direct response to recent market pressure has triggered active trading of SOFR futures - Federal Fund Rate basis swaps, while other rates in the repo market remain elevated. Wall Street strategists warn that with reserve shrinkage and more Treasury bill issuance injecting collateral into the market, funding pressure will persist until November.
Mark Cabana, head of U.S. interest rate strategy at Bank of America, stated that the ongoing pressure will eventually force the Fed to add liquidity ahead of the December meeting.
"The Fed's choice to remain passive in liquidity injections may be due to its belief that the current funding pressure is temporary," Cabana wrote in a client note, "but we think this is unlikely. As quantitative tightening continues, funding pressure is likely to persist and intensify." (FX678)
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