SOFR swap surge points to Q2 repo hedging

Strategists say 27 swaps traded last week with July 3 expiries likely to be quarter-end US repo rate hedges

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Last week’s surge in the number of swaps referencing the US secured overnight financing rate with July 3 expiries suggests that investors may be already using SOFR to hedge a possible spike in US repo rates at the end of the second quarter, strategists say.

There were 39 SOFR swap trades reported on the Depository Trust & Clearing Corporation swap data repository over four days last week, 27 of which expired on July 3. The 39 trades totalled $11.8 billion notional – before last week, 75 swaps

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