Banks scramble for overnight cash, SOFR volume explodes to $3.41 trillion

by

https://fred.stlouisfed.org/series/SOFRVOL

Great read. As our system becomes increasingly reliant on the repo market for financial leverage, there are just as many participants who are borrowing collateral (i.e., short rates) and who stand to lose billions if rates rally sharply.

It is not just the absolute level of rates that matters, but also the degree of volatility.

A good reminder that the longer and higher the market goes, the more leverage builds up, and the more fragile and susceptible to external shocks the system becomes.

Grok:
“Recent SOFR volumes around $3.4T are high, reflecting increased liquidity demand amid Fed policy uncertainty and quarter-end effects. While similar to pre-crisis spikes in 2019/2023, official data shows no unusual volatility, and analysts are divided—some see stress signals, others view it as routine hedging. Worth watching, but not yet a clear crisis indicator.”

How long can AI giants pile on debt when the hardware expires in five years and the profits aren’t coming