Accessible Version
What Happened in Money Markets in September 2019?, Accessible Version
Figure 1: SOFR and EFFR
Figure 1 shows the effective federal funds rate (the dashed purple line) and the secured overnight financing rate (the green solid line), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, since December 2015. The EFFR has been quite stable and only printed outside the FOMC’s target range on one day before September 17. While SOFR has been more volatile compared to the EFFR and exhibited some quarter-end seasonality, it rarely moves more than 20 basis points on a day. On Monday, September 16, SOFR printed at 2.43 percent, 13 basis points higher than the previous business day. With pressures in the repo market spilling over into the fed funds market, the EFFR printed at 2.25 percent, 11 basis points above the Friday print and at the top of the FOMC’s target range. On September 17, the EFFR moved above the top of the target range to 2.3 percent and the SOFR increased to above 5 percent.
Source: Data available on FRBNY public website.
Note: Daily prints of SOFR and EFFR from December 1, 2015 to September 30, 2019.
Figure 2: Distribution of SOFR Volumes
Figures 2 and 3 show the shift in the distribution of trades in the repo market and the fed funds market, respectively. The black line on both charts displays the cumulative share of volume at a particular spread to IOER from January 2 through September 13, 2019. The blue dashed line displays the cumulative share of volume at a particular spread to IOER on September 16. The red dashed line displays the cumulative share of volume at a particular spread to IOER on September 17. Finally, the dotted orange line displays the cumulative share of volume at a particular spread to IOER on September 19. On September 16 and 17, the range of trades in both markets expanded significantly and rates shifted higher. On September 17, the distribution of rates in both markets reverted closer to the average distributions observed over the year the next day.
Source: FICC repo data from the Federal Reserve Bank of New York.
Figure 3: Distribution of EFFR Volumes
Figures 2 and 3 show the shift in the distribution of trades in the repo market and the fed funds market, respectively. The black line on both charts displays the cumulative share of volume at a particular spread to IOER from January 2 through September 13, 2019. The blue dashed line displays the cumulative share of volume at a particular spread to IOER on September 16. The red dashed line displays the cumulative share of volume at a particular spread to IOER on September 17. Finally, the dotted orange line displays the cumulative share of volume at a particular spread to IOER on September 19. On September 16 and 17, the range of trades in both markets expanded significantly and rates shifted higher. On September 17, the distribution of rates in both markets reverted closer to the average distributions observed over the year the next day.
Source: FR2420 Report of Selected Money Market Rates from the Board of Governors of the Federal Reserve.
Figure 4: Reserves and Treasury Securities Outstanding
Figure 4 displays total Treasury securities outstanding (the red line) versus reserve balances (the blue line) since January 2016. While reserves were declining, total Treasury securities outstanding were increasing.
Source: Weekly snapshots of aggregate reserve balances are provided by the Federal Reserve Board's H.3 release. Public debt outstanding data are dauily and from HAVER Analytics.
Figure 5: Net Treasury Positions of Primary Dealers
Figure 5 shows the net Treasury positions of primary dealers since 2015 from the public FR2004 data release. In early 2019, net Treasury positions held by primary dealers reached an all-time high.
Source: Data are from the weekly release of primary dealer positions available on the public FRBNY website.
Note: Data are weekly Wednesday snapshots from January 7, 2015 to September 11, 2019.
Figure 6: Borrowing Dynamics in Triparty Repo
Figures 6 and 7 show the transacted amounts and the associated rates by borrowers and lenders, respectively, on September 16 (blue dots) and on September 17 (red triangles), as well as year-to-date averages (green squares) in the Treasury triparty repo market. As shown in these figures, transacted amounts by institutions are very similar on September 16 and 17 to those on normal days. Each data point represents total volume and spread of overnight triparty Treasury repos by either borrower (Figure 6) or lender (Figure 7). The spread is the volume-weighted average rate minus the Interest on Excess Reserves (IOER).
Source: FRBNY Triparty Transaction Data.
Note: Each data point represents total volume and spread of overnight triparty Treasury repo by borrower. The borrowing spread is the volumn-weighted average rate minus IOER.
Figure 7: Lending Dynamics in Triparty Repo
Figures 6 and 7 show the transacted amounts and the associated rates by borrowers and lenders, respectively, on September 16 (blue dots) and on September 17 (red triangles), as well as year-to-date averages (green squares) in the Treasury triparty repo market. As shown in these figures, transacted amounts by institutions are very similar on September 16 and 17 to those on normal days. Each data point represents total volume and spread of overnight triparty Treasury repos by either borrower (Figure 6) or lender (Figure 7). The spread is the volume-weighted average rate minus the Interest on Excess Reserves (IOER).
Source: FRBNY Triparty Transaction Data.
Note: Each data point represents total volume and spread of overnight triparty Treasury repo by lender. The lending spread is the volumn-weighted average rate minus IOER.