Short Rates Desk
Fri, Jun 26, 2026

Notes for Fri, Jun 26, 2026

Morning brief

· generated 07:04 ET

No catalyst overnight; quarter-end and a fat bill special are the only live wires

Nothing forced a re-baseline overnight; priors hold. The 06-25 bill special and the quarter-end funding turn are the only things to watch.

Overnight

Quiet tape, and we'd carry yesterday's book into the open. No P0/P1 on the calendar, no Tier 1 prints overnight, nothing in the commentary feed, the front end isn't event-driven here, so priors hold and we're not re-baselining.

One screen-hygiene note before anyone trades off a stale tape: our rate complex is fixed through Tuesday 06-23[1], SOFR, EFFR, OBFR and the repo rates all carry that stamp. Wednesday's and Thursday's fixings haven't ingested, and Thursday's 06-25 SOFR publishes at 8 AM, after this note ships. The policy band reads current to 06-24[2]; the rate complex behind it does not. Don't read the gap as calm, it's the publish lag, not information.

Quarter-end and the bill special

The only fresh signal is collateral, not funding. Thursday's sec-lending auction (06-25) lit up 912797TM9, the Jan-21-27 bill, at 25.4 bp over the floor[3], roughly 4x the 5-7 bp cluster the rest of the specials sit in. The names below it, 912797VB0 at 6.6[4], 912797UK1 at 6.0[5], 912797VM6 at 5.7[6], are all bills maturing inside four months, and the lone note, 91282CQL8, prints 5.2[7]. Four of five specials being bills is the load-bearing tell: this reads as bill-supply scarcity at a single point on the curve, not idiosyncratic richening of a benchmark note.

What we can't confirm yet is whether that issue-level pressure is bleeding into general collateral, because GC repo and SOFR only run through 06-23[8], the specialness sits two days ahead of the funding print that would corroborate it. Our read that this stays contained breaks if Thursday's 06-25 SOFR comes in firm at the 8 AM publish.

Quarter-end is the overlay. We sit four sessions from 06-30, and the balance-sheet weeklies stop at 06-17, reserves (WRESBAL)[9], the TGA balance[10], and SOMA holdings (TREAST)[11] are all a week-plus stale into the turn. RRP take-up is fresher, fixed to 06-23[12]; we'd triangulate the reserve drain off that differential rather than wait on the Thursday H.4.1. Base case is a modest quarter-end SOFR firming that mean-reverts into early July, we'd lean for it, not size it.

Citations

  1. [1]our rate complex is fixed through Tuesday 06-23 (2026-06-23) — NY Fed SOFR · Jun 23, 2026
  2. [2]The policy band reads current to 06-24 (2026-06-24) — FRED DFEDTARL · Jun 24, 2026
  3. [3]912797TM9, the Jan-21-27 bill, at 25.4 bp over the floor (25.4 bp) — Observation · observation:seclend_observations:912797TM9:2026-06-25
  4. [4]912797VB0 at 6.6 (6.6 bp) — Observation · observation:seclend_observations:912797VB0:2026-06-25
  5. [5]912797UK1 at 6.0 (6.0 bp) — Observation · observation:seclend_observations:912797UK1:2026-06-25
  6. [6]912797VM6 at 5.7 (5.7 bp) — Observation · observation:seclend_observations:912797VM6:2026-06-25
  7. [7]the lone note, 91282CQL8, prints 5.2 (5.2 bp) — Observation · observation:seclend_observations:91282CQL8:2026-06-25
  8. [8]GC repo and SOFR only run through 06-23 (2026-06-23) — DTCC GCF repo · Jun 23, 2026
  9. [9]reserves (WRESBAL) (2026-06-17) — FRED WRESBAL · Jun 17, 2026
  10. [10]the TGA balance (2026-06-17) — Treasury General Account · Jun 17, 2026
  11. [11]SOMA holdings (TREAST) (2026-06-17) — FRED TREAST · Jun 17, 2026
  12. [12]RRP take-up is fresher, fixed to 06-23 (2026-06-23) — FRED RRPONTSYD · Jun 23, 2026

Generated by Short Rates Desk. Informational only. Not investment advice.

Close brief

· generated 16:19 ET

Quarter-end firming, controlled, this is term premium in funding, not a Fed repricing

Funding drifts firmer into the 6/30 turn while the policy anchor stays inert; floor intact, no scarcity event yet.

The read

Status quo holds, with a quarter-end bias. The policy anchor didn't move: the target band sat at 3.50-3.75[1] and IORB held 3.65 through today[2], with the RRP award rate pinned at 3.50[3]. What moved is funding, and it moved the way a pre-turn tape should. SOFR firmed to 3.64% on 6/25[4] from 3.61% on 6/22[5], and GCF repo lifted to 3.661% on UST and 3.686% on MBS[6]. Every unsecured and secured fixing, EFFR at 3.63%[7], with OBFR, TGCR and BGCR clustered at 3.62%[8], still prints inside the band.

The load-bearing tell is that floor relationship. SOFR sits roughly 1bp under IORB and 14bp over the RRP award. That is controlled drift into 6/30, not a loss of rate control. We read it as term premium in funding, calendar pressure on balance-sheet capacity, not Fed repricing. What we reject is the consensus instinct to call any pre-turn firming the opening of a scarcity event. It isn't, yet.

Reserves draining through the TGA, not the balance sheet

Reserves are leaking, but through the Treasury's account rather than runoff. WRESBAL fell to $2,951,416M on 6/24[9] from $3,080,723M on 6/10[10], roughly $129B lighter, while the TGA rebuilt to $901,845M[11] from $801,084M[12]. Total Fed assets were flat, WALCL at $6,735,645M on 6/24[13] versus $6,736,424M the prior week[14], so that week's reserve squeeze is a liability-side reshuffle, not active QT. The one genuinely active runoff channel keeps grinding: MBS holdings ticked down to $1,961,590M on 6/24[15], consistent with MBS GCF trading a touch rich to UST into the turn.

The buffer is thin. ON RRP take-up was just $5.7B on 6/25[16] and has spent the month between a quarter-billion and ~$11B[17], little cushion under the floor if cash gets scarce on turn day.

Specials look scarier than the aggregate warrants

The specials tape reads worse than the collateral picture. SOMA lent the 12/24/26 bill (912797TC1) at 158.1bp over the floor on 6/24[18], and the 01/21/27 bill (912797TM9) cleared at 46.2bp on today's operation[19]. Pocket scarcity in specific issues, yes, but with broad RRP usage minimal, collateral isn't tight in aggregate.

The bill curve tells the same supply story. The 4-week richened to 3.56% on 6/24[20] while the 6-month cheapened hard, 3.84% on 6/22[21] off 3.68% a week earlier[22], and the 3-month sat at 3.70%[23]. That dispersion is TGA-rebuild issuance landing further out the bill curve, not uniform funding stress.

Duration divergence, and the trade into tomorrow

Duration pulled away from funding, which is the tension to carry into tomorrow. The 2-year round-tripped, 4.24% on 6/22[24] back to 4.11% on 6/24[25], and 2s10s held 0.31 on 6/25[26], a curve steepening modestly even as repo grinds up. The 10-year sat at 4.41%[27] and the 30-year at 4.86% on 6/24[28]. Mind the lag: FRED constant-maturity closes are loaded only through 6/24, so today's duration print isn't in the cited set, the divergence is real but its freshest leg is unobserved.

The trade is the turn. We'd expect SOFR and GCF to print firmer on 6/30 and ebb after. The view breaks if turn-day SOFR jumps materially above IORB or RRP take-up collapses toward zero with fixings still climbing, that flips the read from calendar term premium to genuine scarcity. Assumes Treasury holds its bill-issuance pace and reserves stay clear of the scarcity threshold; we have no benchmark on where that threshold sits, so we're watching the turn prints rather than guessing the level.

Citations

  1. [1]the target band sat at 3.50-3.75 (3.50) — FRED DFEDTARL · Jun 26, 2026
  2. [2]IORB held 3.65 through today (3.65) — FRED IORB · Jun 26, 2026
  3. [3]the RRP award rate pinned at 3.50 (3.50) — FRED RRPONTSYAWARD · Jun 25, 2026
  4. [4]SOFR firmed to 3.64% on 6/25 (3.64000%) — NY Fed SOFR · Jun 25, 2026
  5. [5]from 3.61% on 6/22 (3.61000%) — NY Fed SOFR · Jun 22, 2026
  6. [6]GCF repo lifted to 3.661% on UST and 3.686% on MBS (MBS 3.68600 / UST 3.66100) — DTCC GCF repo · Jun 25, 2026
  7. [7]EFFR at 3.63% (3.63000%) — NY Fed EFFR · Jun 25, 2026
  8. [8]OBFR, TGCR and BGCR clustered at 3.62% (3.62000%) — NY Fed OBFR · Jun 25, 2026
  9. [9]WRESBAL fell to $2,951,416M on 6/24 (2951416) — FRED WRESBAL · Jun 24, 2026
  10. [10]from $3,080,723M on 6/10 (3080723) — FRED WRESBAL · Jun 10, 2026
  11. [11]the TGA rebuilt to $901,845M ($901845M closing) — Treasury General Account · Jun 24, 2026
  12. [12]from $801,084M ($801084M closing) — Treasury General Account · Jun 10, 2026
  13. [13]WALCL at $6,735,645M on 6/24 (6735645) — FRED WALCL · Jun 24, 2026
  14. [14]$6,736,424M the prior week (6736424) — FRED WALCL · Jun 17, 2026
  15. [15]MBS holdings ticked down to $1,961,590M on 6/24 (1961590) — FRED WSHOMCB · Jun 24, 2026
  16. [16]ON RRP take-up was just $5.7B on 6/25 (5.71800) — FRED RRPONTSYD · Jun 25, 2026
  17. [17]between a quarter-billion and ~$11B (0.25100) — FRED RRPONTSYD · Jun 18, 2026
  18. [18]912797TC1) at 158.1bp over the floor on 6/24 (158.1 bp, $4.12B accepted) — Observation · observation:seclend_observations:912797TC1:2026-06-24
  19. [19]912797TM9) cleared at 46.2bp on today's operation (46.2 bp, $1.61B accepted) — Observation · observation:seclend_observations:912797TM9:2026-06-26
  20. [20]The 4-week richened to 3.56% on 6/24 (3.56000) — FRED DTB4WK · Jun 24, 2026
  21. [21]the 6-month cheapened hard, 3.84% on 6/22 (3.84000) — FRED DTB6 · Jun 22, 2026
  22. [22]off 3.68% a week earlier (3.68000) — FRED DTB6 · Jun 16, 2026
  23. [23]the 3-month sat at 3.70% (3.70000) — FRED DTB3 · Jun 24, 2026
  24. [24]4.24% on 6/22 (4.24000) — FRED DGS2 · Jun 22, 2026
  25. [25]back to 4.11% on 6/24 (4.11000) — FRED DGS2 · Jun 24, 2026
  26. [26]2s10s held 0.31 on 6/25 (0.31000) — FRED T10Y2Y · Jun 25, 2026
  27. [27]The 10-year sat at 4.41% (4.41000) — FRED DGS10 · Jun 24, 2026
  28. [28]the 30-year at 4.86% on 6/24 (4.86000) — FRED DGS30 · Jun 24, 2026

Generated by Short Rates Desk. Informational only. Not investment advice.