For the third consecutive session, secured overnight financing printed above the rate the Federal Reserve pays on reserve balances. In a system flush with liquidity, that is not supposed to happen. It is happening.
The mechanics are unglamorous. Dealers warehouse Treasuries between issuance and end-buyers, and they fund that inventory overnight in the repo market. When bill supply is heavy and dealer balance sheets are already committed, the price of that funding rises. What is unusual is not the direction but the persistence.
Balance sheet is not scarce in aggregate. It is scarce exactly where the collateral is.
Desks that lived through September 2019 describe the same texture: a widening that looks like noise on Monday, a term structure that stops making sense by Wednesday, and a Thursday morning where the standing facility gets used by someone who swore they would never touch it.
The standing repo facility exists precisely to cap this. Its stigma problem is the open question. A facility nobody will use is a facility that does not exist, and the first name to draw on it publicly will be read as a signal rather than as plumbing.
Quarter-end compounds the arithmetic. European banks in particular shrink balance sheets across the turn for regulatory reporting, pulling supply out of the market on precisely the dates when demand for it peaks.
None of this is a crisis. All of it is the specific kind of boring dysfunction that precedes one.
