Holiday effect on SOFR?
On those first day of the summer holiday season and waiting for the 4th of July we can ask ourselves if lenders are all on holiday.
As usual, the month-end print of SOFR was higher that other days of the month. The end-of-month, including a week-end, had a rate of 2.50% while Fed Funds were are 2.40%; a 10 bps difference. Nothing unusual. On the first day of the month, SOFR was 3 bps higher that Fed Funds. Nothing unusual. But the 99 percentile rate was 3.85%, 143 bps above the median. This is very unusual. 1% of the notional traded on that day, which amounts to roughly 12 billions, was above 3.85% Who borrowed those 12 billions secured paying so much? On the second day of the month, the print was 2.51%, this is 11 bps above Fed Funds and 1 bp above month-end. This is relatively unusual. The 99 percentile was at 3.10%, 59 bps above the median. This is also very unusual.
What will be the print over the 4th July? Should I be ready to incorporate the 4th of July as a seasonal effect in the curve calibration process? We will know the answer only on the 5th of July!
Edit 5-Jul-2019: The SOFR print over the holiday night (4 July) came at 2.56% this is 15 bps above EFFR (and 6 bps above SOFR June month-end). It appears that there is a real 4th July effect on the SOFR. The 99 percentile was at 2.75%, only 19 bps above the median. This is a lot lower than the last three overnights, where the rates were 3.03%, 3.85% and 3.10%, but still higher than any other day of last month.
As usual, the month-end print of SOFR was higher that other days of the month. The end-of-month, including a week-end, had a rate of 2.50% while Fed Funds were are 2.40%; a 10 bps difference. Nothing unusual. On the first day of the month, SOFR was 3 bps higher that Fed Funds. Nothing unusual. But the 99 percentile rate was 3.85%, 143 bps above the median. This is very unusual. 1% of the notional traded on that day, which amounts to roughly 12 billions, was above 3.85% Who borrowed those 12 billions secured paying so much? On the second day of the month, the print was 2.51%, this is 11 bps above Fed Funds and 1 bp above month-end. This is relatively unusual. The 99 percentile was at 3.10%, 59 bps above the median. This is also very unusual.
What will be the print over the 4th July? Should I be ready to incorporate the 4th of July as a seasonal effect in the curve calibration process? We will know the answer only on the 5th of July!
Edit 5-Jul-2019: The SOFR print over the holiday night (4 July) came at 2.56% this is 15 bps above EFFR (and 6 bps above SOFR June month-end). It appears that there is a real 4th July effect on the SOFR. The 99 percentile was at 2.75%, only 19 bps above the median. This is a lot lower than the last three overnights, where the rates were 3.03%, 3.85% and 3.10%, but still higher than any other day of last month.
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