Jumbo SOFR swaps herald new world of repo betting
Swaps traders told to “learn repo market dynamics” as market catches glimpse of new trading strategy
A $6 billion interest rate swap that hit the market this week – and was quickly followed by a $3 billion trade – suggests traders are starting to explore opportunities created by the rates world's newest benchmark, the US secured overnight financing rate, or SOFR.
Because the benchmark is a blend of three different repo rates, SOFR swaps could now be used to hedge or exploit repo market moves –
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