At Any Rate US Rates - Does QT's end matter for funding and Treasury markets?
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Oct 17, 2025 Teresa Ho, Head of U.S. Short Duration Strategy at J.P. Morgan, joins Phoebe White to delve into the implications of Quantitative Tightening's potential end. They explore the recent spike in SOFR and repo rates, attributing it to T-bill supply and coupon settlements. Teresa highlights that the anticipated $20bn/month runoff may not significantly alleviate funding pressures. They also discuss the limited impact of QT's end on yield outlooks, along with insights into inflation markets and break-even rates amid fluctuating oil prices.
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Funding Markets Increasingly Fragile
- Funding markets have become more sensitive to small supply and collateral changes as liquidity tightens.
- Teresa Ho says marginal cash lenders are harder to find and the hurdle to deploy reserves has risen.
SRF May Be A Weak Repo Ceiling
- SRF usage was modest despite high GC rates, raising doubts about its effectiveness as a repo ceiling.
- Teresa Ho highlights hesitation to use SRF even when repo was expensive.
QT's End Offers Limited Funding Relief
- Ending QT soon won't meaningfully relieve year-end funding because monthly runoff is small (~$20bn).
- Teresa Ho argues Treasury and money fund flows dwarf the marginal effect of QT ending.