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Aug 19 - 10:55 AM

USD: Funding Likely Tighter Into Year-End; USD Positive - BofA

By eFXdata  —  Aug 19 - 09:37 AM

Bank of America Global Research discusses the USD funding outlook into year-end.

USD funding is likely to be biased slightly tighter into end '22. Pressure to come from gov't supply, bank capital constraints, and MMF reform risk. We discuss drivers across:," BofA notes. 

Gov't paper: bill FHLB supply will likely grow $120$125-150b. 

Repo: UST GC repo rates should remain quite stable near ON RRP as repo cash still overwhelms collateral. 

Bank funding: tighter conditions driven by: Fed QT, dealer market-making constraints, finalization of MMF reform. 

Risks are to higher USD funding rates vs FF OIS. Dec FRA-OIS is already priced for more year-end widening vs usual," BofA adds. 

BofA Global Research


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