Short Rates Desk
Mon, Jul 06, 2026

Notes for Mon, Jul 06, 2026

Morning brief

· generated 14:50 ET

Turn's cleared, funding's boring, one January bill is doing all the shouting

Quarter-end reversed clean, secured funding sits at the ceiling not through it; the only live signal is a single bill squeezing in SOMA lending.

Read

No commentary, no Tier 1, no calendar print, status quo carries into the open. Our read: the quarter-end turn has fully cleared and the funding complex is boring, sitting at the ceiling rather than punching through it. We'd fade anyone reading the June 30 spike as the start of a tightening regime. The one thing on our screen worth desk time is a single bill, 912797TM9, that keeps getting louder in SOMA lending. View breaks two ways, if Monday's secured print comes back above IORB, or if that special bleeds into general collateral.

The turn cleared

SOFR printed 3.68% on quarter-end[1], GCF Treasury repo tagged 3.739%[2], and ON RRP take-up jumped to $26.9bn[3], textbook turn artifacts, not a regime. By July 2 SOFR was back to 3.64%[4], GCF UST to 3.677%[5], and RRP down to $2.2bn[6]. Thursday's 3.64% is the last clean secured fix; Friday was the July 4 observance, so repo and SOFR have no print and the next SOFR lands 8 AM tomorrow. That leaves SOFR one basis point under IORB at 3.65%[7] and a hair above EFFR at 3.63%[8], the signature of soft, ceiling-anchored funding, not scarcity. Reserves at $2.97tn on July 1 are down from $3.13tn in mid-May[9], and ON RRP is effectively drained on non-turn days, but neither is forcing rates higher yet. We reject reading the drain as stress while secured trades below the IORB ceiling; reserves at this level are still well clear of anything that bites.

The one signal

912797TM9, the January 21, 2027 bill, is the loudest thing in the bundle. It's ramped in SOMA securities lending from 46.2bp above floor on June 26 to 83.9bp today, with $1.76bn accepted[10]. That's a real short or a genuine collateral grab in one CUSIP, and note the facility caps accepted size, so the true special may be wider than the print. What keeps it idiosyncratic rather than systemic is the load-bearing tell: general collateral didn't follow. GCF UST sat at 3.677% into the holiday and the next-richest specials are trivial, an October bill at 11.3bp[11], everything else under eight. If this were broad collateral scarcity, GC would be richening alongside it; it isn't. We'd watch whether the squeeze leaks into GCF or the SOFR distribution, that's what flips this from a single-name story to a funding story. We don't have the driver, and that's the gap worth chasing today.

Front end and the curve

Front-end levels say no cut is coming. 2s closed July 1 at 4.17%[12] and 6-month bills at 3.84%[13], both sit above the 3.50 - 3.75% target range[14], which is supply and term premium, not easing expectations. 2s10s at +35bp on July 2 has steepened off the +27bp mid-June trough[15]. On the balance sheet, SOMA Treasuries rose to $4.492tn[16] while MBS holdings fell to $1.948tn[17], reinvestment into the front against MBS runoff, tilting the portfolio shorter. TGA sat at $807bn July 1, down from the $956bn June peak[18]; the rebuild from here is the reserve-drain path we'd watch, and the trade assumes Treasury holds the bill-issuance pace, a coupon-heavy surprise that rebuilds cash faster cheapens the front and makes us wrong. Dealer net Treasury longs are our stale spot at $492bn as of June 17[19], record territory but three weeks old and pre-turn; if that inventory has to be financed into lighter reserves it matters, and we just can't see the current number.

Citations

  1. [1]SOFR printed 3.68% on quarter-end (SOFR 2026-06-30: 3.68000%) — NY Fed SOFR · Jun 30, 2026
  2. [2]GCF Treasury repo tagged 3.739% (2026-06-30 UST 3.73900) — DTCC GCF repo · Jun 30, 2026
  3. [3]ON RRP take-up jumped to $26.9bn (RRPONTSYD 2026-06-30: 26.9) — FRED RRPONTSYD · Jun 30, 2026
  4. [4]By July 2 SOFR was back to 3.64% (SOFR 2026-07-02: 3.64000%) — NY Fed SOFR · Jul 2, 2026
  5. [5]GCF UST to 3.677% (2026-07-02 UST 3.67700) — DTCC GCF repo · Jul 2, 2026
  6. [6]RRP down to $2.2bn (RRPONTSYD 2026-07-02: 2.175) — FRED RRPONTSYD · Jul 2, 2026
  7. [7]one basis point under IORB at 3.65% (IORB 2026-07-06: 3.65) — FRED IORB · Jul 6, 2026
  8. [8]a hair above EFFR at 3.63% (EFFR 2026-07-03: 3.63000%) — NY Fed EFFR · Jul 3, 2026
  9. [9]Reserves at $2.97tn on July 1 are down from $3.13tn in mid-May (WRESBAL 2026-07-01: 2966897) — FRED WRESBAL · Jul 1, 2026
  10. [10]from 46.2bp above floor on June 26 to 83.9bp today, with $1.76bn accepted (912797TM9 2026-07-06: 83.9 bp, $1.76B accepted) — Observation · observation:seclend_observations:912797TM9:2026-07-06
  11. [11]an October bill at 11.3bp (912797UJ4 (B 10/08/26) 2026-07-06: 11.3 bp) — Observation · observation:seclend_observations:912797UJ4:2026-07-06
  12. [12]2s closed July 1 at 4.17% (DGS2 2026-07-01: 4.17) — FRED DGS2 · Jul 1, 2026
  13. [13]6-month bills at 3.84% (DTB6 2026-07-01: 3.84) — FRED DTB6 · Jul 1, 2026
  14. [14]above the 3.50 - 3.75% target range (DFEDTARU 2026-07-06: 3.75) — FRED DFEDTARU · Jul 6, 2026
  15. [15]2s10s at +35bp on July 2 has steepened off the +27bp mid-June trough (T10Y2Y 2026-07-02: 0.35) — FRED T10Y2Y · Jul 2, 2026
  16. [16]SOMA Treasuries rose to $4.492tn (TREAST 2026-07-01: 4492235) — FRED TREAST · Jul 1, 2026
  17. [17]MBS holdings fell to $1.948tn (WSHOMCB 2026-07-01: 1948398) — FRED WSHOMCB · Jul 1, 2026
  18. [18]TGA sat at $807bn July 1, down from the $956bn June peak (2026-07-01: $807359M closing) — Treasury General Account · Jul 1, 2026
  19. [19]$492bn as of June 17 (NYPD-PD_SB_T_TOT-A 2026-06-17: 492103000000) — OFR NYPD-PD_SB_T_TOT-A · Jun 17, 2026

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

Close brief

· generated 11:55 ET

Turn's fully cleared, both break tests held, January bill louder but still caged

Funding closed calm, SOFR back below IORB, GC washed out post-turn, and the lone January special widened without touching general collateral.

Both tests held

We keep the constructive stance: neither break test on record tripped today. SOFR set 3.63 on Monday's print[1], two basis points under IORB at 3.65[2], the first test, a secured print back above IORB, did not fire. GC settled to 3.657 on GCF UST[3], down from the 3.739 quarter-end spike on June 30[4], so the turn has fully washed out. EFFR stayed pinned at 3.63[5]. Nothing in the overnight complex forces a re-baseline; priors carry into tomorrow.

The January bill keeps humming

The one live wire is louder. 912797TM9, the January 21 2027 bill, richened to 83.9bp special on $1.76bn accepted[6], up from 62.1bp at the turn[7], the trajectory is one-directional and worth respecting rather than waving off. The alternate read, that an accelerating single-name special is the first crack in an otherwise calm tape, is the one we weighed and rejected. Load-bearing is general collateral: GC didn't budge as the bill widened, and the next-richest issue, the October bill at 11.3bp[8], sits a full 70-plus basis points back. That gap is the tell, this is idiosyncratic demand for one CUSIP, not a repo squeeze. The view flips if the print bleeds into GC, and it hasn't.

Plumbing drained, not scarce

RRP is effectively empty, 2.7bn on Monday once the 26.9bn quarter-end blip[10] rolled off[9], but that is drained, not scarce. The distinction is the corridor: reserves sit at 2.97trn on WRESBAL[11], up modestly from 2.95trn the prior week[12], and SOFR grinding below IORB rather than above it is the signal cash isn't short. Scarcity would show as an empty facility with SOFR pushing through IORB; we have the empty facility and the opposite rate behavior. TGA closed the week at 807bn[13] versus 902bn the prior Wednesday[14], still well off the 956bn June peak[15].

Into tomorrow

The assumption we carry is that Treasury rebuilds the TGA on bills, not coupons. With RRP drained, the next cash rebuild drains reserves directly instead of being buffered by the facility, so a coupon-heavy surprise is the thing that would cheapen the front and put us wrong, nothing in this week's tape forces that yet. One caveat on any curve read: the DGS and bill series run only through July 2, four sessions behind the live repo tape, so we lean on the 7/6 funding prints and treat bill levels, six-month at 3.81[16], as stale. T10Y2Y at 0.35 is holding its steepening[17], but that is a duration signal, not a funding one.

Citations

  1. [1]SOFR set 3.63 on Monday's print (3.63000) — NY Fed SOFR · Jul 6, 2026
  2. [2]two basis points under IORB at 3.65 (3.65000000) — FRED IORB · Jul 6, 2026
  3. [3]GC settled to 3.657 on GCF UST (UST 3.65700) — DTCC GCF repo · Jul 6, 2026
  4. [4]down from the 3.739 quarter-end spike on June 30 (UST 3.73900) — DTCC GCF repo · Jun 30, 2026
  5. [5]EFFR stayed pinned at 3.63 (3.63000) — NY Fed EFFR · Jul 6, 2026
  6. [6]richened to 83.9bp special on $1.76bn accepted (83.9 bp, $1.76B accepted) — Observation · observation:seclend_observations:912797TM9:2026-07-06
  7. [7]up from 62.1bp at the turn (62.1 bp, $1.92B accepted) — Observation · observation:seclend_observations:912797TM9:2026-06-30
  8. [8]the next-richest issue, the October bill at 11.3bp (11.3 bp, $1.35B accepted) — Observation · observation:seclend_observations:912797UJ4:2026-07-06
  9. [9]2.7bn on Monday once the 26.9bn quarter-end blip rolled off (2.71900000) — FRED RRPONTSYD · Jul 6, 2026
  10. [10]the 26.9bn quarter-end blip (26.90000000) — FRED RRPONTSYD · Jun 30, 2026
  11. [11]reserves sit at 2.97trn on WRESBAL (2966897.00000000) — FRED WRESBAL · Jul 1, 2026
  12. [12]up modestly from 2.95trn the prior week (2951416.00000000) — FRED WRESBAL · Jun 24, 2026
  13. [13]TGA closed the week at 807bn ($807359M closing) — Treasury General Account · Jul 1, 2026
  14. [14]versus 902bn the prior Wednesday ($901845M closing) — Treasury General Account · Jun 24, 2026
  15. [15]still well off the 956bn June peak ($956502M closing) — Treasury General Account · Jun 17, 2026
  16. [16]six-month at 3.81 (3.81000000) — FRED DTB6 · Jul 2, 2026
  17. [17]T10Y2Y at 0.35 is holding its steepening (0.35000000) — FRED T10Y2Y · Jul 6, 2026

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