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According to data released by the Federal Reserve Bank of New York on May 21, the Secured Overnight Financing Rate (SOFR) has dipped to 4.26%, marking a new low since December 2022. Notably, the interest rate spread between SOFR and the Federal Reserve's Overnight Reverse Repo Facility (RRP) rate has tightened to a mere 1 basis point, the narrowest in six months. This narrowing is primarily attributed to the abundance of short-term funding. Additionally, there have been shifts in the overnight general collateral (GC) repo rate and bid-ask spreads. Despite these changes, the federal funds rate has remained steady at 4.33%. Analysts at Oxford Economics attribute the subdued trading activity in the repo market as a pivotal factor behind these developments.
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