Short Rates Desk
Wed, Jul 01, 2026

Notes for Wed, Jul 01, 2026

Morning brief

No morning brief was published for this session.

Close brief

· generated 16:19 ET

Quarter-end pop, not a regime break, we fade the funding spike into the open

June 30 turn spiked SOFR through IORB, but unsecured stayed anchored and July 1 specials already eased. We read a turn, not a regime.

The read

Today's publish carried the June 30 quarter-end print, and it popped. SOFR set at 3.68%[1], up 6bp from 3.62% the prior day[2] and 3bp through the 3.65% IORB[3]. DTCC GCF Treasury repo jumped to 3.739%[4] from 3.662%[5], and ON RRP take-up spiked to $26.9B[6], up from $3.5B the prior day[7]. We read this as a turn-of-quarter dislocation, not the front end repricing a funding regime. The tell isn't the size of the pop, it's what didn't move with it.

The tell

EFFR and OBFR both sat at 3.63% on June 30[8], flat with where they'd printed all month. Secured funding cleared through IORB while the unsecured benchmarks didn't flinch[9], a collateral and balance-sheet constraint at the turn, not a shift in the marginal cost of cash. More load-bearing: the one July 1 datapoint we have already shows the pressure receding. The most special issue in SOMA lending, the January 2027 bill 912797TM9, came off at 41.6bp above floor on July 1[10], down from 62.1bp on June 30[11]. Specialness is bleeding out, not building. A durable regime shift would need the unsecured side to move and the specials to widen after the turn, we are getting the opposite.

What breaks it

The view breaks if the July 1 SOFR set, which we get tomorrow morning, holds above IORB, or if GCF fails to retrace toward its June range. That falsification lands inside 24 hours. Regardless of the turn, the diagnostic we keep watching is that SOFR cleared through IORB, not merely above the RRP floor, secured cash printed above what banks earn on reserves. Reserves sat at $2.951T on June 24[12], down from $3.033T a week earlier[13], so the ample cushion is thinner than the headline suggests. One thing that doesn't square: TGA fell to $901.8B[14] from $956.5B[15] over that same week, which should add reserves, yet reserves dropped anyway, other drains are offsetting, and the print is a week stale into the turn. This assumes reserves stay ample; a sharp WRESBAL drop on next week's H.4.1 through the turn would weaken it.

Duration stayed calm

None of the front-end noise reached the curve. 2s10s sat at 30bp on June 30[16], near the flats of a move down from roughly 40bp in mid-June, and the 10y term premium estimate kept grinding lower, to 0.68 by June 26[17]. The 10y sits at 4.38%[18] on the latest print, the 2y at 4.10%[19]. Bills stayed heavy, 3m at 3.74%[20], 6m at 3.84%[21], both near or through IORB, consistent with supply and the dealer-inventory build, primary-dealer bill positions at $492B on June 17[22], rather than any duration stress. Into tomorrow: fade the funding pop, hold the flattener, and take the 8am SOFR print as the confirm-or-fade.

Citations

  1. [1]SOFR set at 3.68% (SOFR 2026-06-30: 3.68000%) — NY Fed SOFR · Jun 30, 2026
  2. [2]up 6bp from 3.62% the prior day (SOFR 2026-06-29: 3.62000%) — NY Fed SOFR · Jun 29, 2026
  3. [3]3bp through the 3.65% IORB (IORB 2026-07-01: 3.65000000) — FRED IORB · Jul 1, 2026
  4. [4]DTCC GCF Treasury repo jumped to 3.739% (2026-06-30: UST 3.73900) — DTCC GCF repo · Jun 30, 2026
  5. [5]from 3.662% (2026-06-29: UST 3.66200) — DTCC GCF repo · Jun 29, 2026
  6. [6]ON RRP take-up spiked to $26.9B (RRPONTSYD 2026-06-30: 26.90000000) — FRED RRPONTSYD · Jun 30, 2026
  7. [7]up from $3.5B the prior day (RRPONTSYD 2026-06-29: 3.54600000) — FRED RRPONTSYD · Jun 29, 2026
  8. [8]EFFR and OBFR both sat at 3.63% on June 30 (EFFR 2026-06-30: 3.63000%) — NY Fed EFFR · Jun 30, 2026
  9. [9]the unsecured benchmarks didn't flinch (OBFR 2026-06-30: 3.63000%) — NY Fed OBFR · Jun 30, 2026
  10. [10]came off at 41.6bp above floor on July 1 (912797TM9 (B 01/21/27) at 41.6 bp, $1.61B accepted) — Observation · observation:seclend_observations:912797TM9:2026-07-01
  11. [11]down from 62.1bp on June 30 (912797TM9 (B 01/21/27) at 62.1 bp, $1.92B accepted) — Observation · observation:seclend_observations:912797TM9:2026-06-30
  12. [12]Reserves sat at $2.951T on June 24 (WRESBAL 2026-06-24: 2951416.00000000) — FRED WRESBAL · Jun 24, 2026
  13. [13]down from $3.033T a week earlier (WRESBAL 2026-06-17: 3033444.00000000) — FRED WRESBAL · Jun 17, 2026
  14. [14]TGA fell to $901.8B (2026-06-24: $901845M closing) — Treasury General Account · Jun 24, 2026
  15. [15]from $956.5B (2026-06-17: $956502M closing) — Treasury General Account · Jun 17, 2026
  16. [16]2s10s sat at 30bp on June 30 (T10Y2Y 2026-06-30: 0.30000000) — FRED T10Y2Y · Jun 30, 2026
  17. [17]10y term premium estimate kept grinding lower, to 0.68 by June 26 (THREEFYTP10 2026-06-26: 0.68420000) — FRED THREEFYTP10 · Jun 26, 2026
  18. [18]The 10y sits at 4.38% (DGS10 2026-06-29: 4.38000000) — FRED DGS10 · Jun 29, 2026
  19. [19]the 2y at 4.10% (DGS2 2026-06-29: 4.10000000) — FRED DGS2 · Jun 29, 2026
  20. [20]3m at 3.74% (DTB3 2026-06-29: 3.74000000) — FRED DTB3 · Jun 29, 2026
  21. [21]6m at 3.84% (DTB6 2026-06-29: 3.84000000) — FRED DTB6 · Jun 29, 2026
  22. [22]primary-dealer bill positions at $492B on June 17 (NYPD-PD_SB_T_TOT-A 2026-06-17: 492103000000.00000000) — OFR NYPD-PD_SB_T_TOT-A · Jun 17, 2026

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