US Funding Rate Collapses: Cheaper Cash, Higher Risk in Financial Markets
US Funding Rate Collapses: Cheaper Cash, Higher Risk in Financial Markets
The Secured Overnight Financing Rate (SOFR) has experienced a sudden collapse, making overnight borrowing in U.S. markets significantly cheaper. This event is described as 'seismic' for financial markets, indicating an opening of the 'floodgates' in the global financial system, potentially leading to higher risks despite cheaper access to capital.
The Secured Overnight Financing Rate (SOFR) just fell off a cliff. For most people outside financial circles, that means absolutely nothing. For markets, it’s seismic. Borrowing money overnight in U.S. markets suddenly got much cheaper. And in the plumbing of the global financial system, that’s the equivalent of someone opening the floodgates a little wider.