At Any Rate At Any Rate: Of funding and refundings
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Oct 24, 2025 Teresa Ho, Head of US Short Duration Strategy at J.P. Morgan, and Phoebe White, Head of US Inflation Strategy at J.P. Morgan, dive into the complexities of funding markets and the upcoming Treasury refunding. Teresa unpacks recent pressures in the funding landscape, while Phoebe outlines how changes in fiscal projections impact Treasury supply. They discuss implications of ending quantitative tightening and explore Fed tools that could alleviate funding strains. Tune in for insightful analyses on how recent trends shape market dynamics!
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Funding Strains From TGA, QT And Money Funds
- Funding pressures rose due to TGA rebuild, QT and money funds extending duration into T-bills.
- Overnight RRP balances fell to near zero, removing a key shock absorber and raising sensitivity to collateral adds.
Fed Officials Signaling Reserves Are Ample
- Several Fed officials now view reserves as ample, implying less need for large balance sheet.
- Chair Powell signaled runoff should end in the coming months, reinforcing shift in policy stance.
Stop QT Now To Avoid Funding Dislocation
- The Fed should end QT immediately to avoid repeat of 2019-style funding dislocation.
- Ending runoff at the next FOMC meeting would be a prudent, conservative step given current market strains.