Core Insights - The U.S. banking sector borrowed $6.5 billion from the Federal Reserve's Standing Repo Facility (SRF) on Wednesday, indicating tightening liquidity to meet large Treasury settlement demands this week [1] - The borrowing amount set a new record for daily borrowing by banks from the Federal Reserve since the COVID-19 pandemic [1] - General collateral (GC) repo rates peaked at 4.36% on Wednesday, closing at 4.12%, which is unusual as it is not the end of the month or quarter when repo rates typically spike [1] - A strategist from TD Securities noted that this trend indicates a slow but steady reduction in liquidity, suggesting that the Federal Reserve should pay closer attention if SRF usage continues to rise [1]

Group 1 - A significant increase in the Secured Overnight Financing Rate (SOFR) has been observed, rising from 4.42% to 4.51%, marking the largest increase since December 31 of the previous year [1][3] - The gap between SOFR and the actual federal funds rate has widened to 18 basis points, the largest difference since December 26 of the previous year, with expectations of a 25 basis point cut in the federal funds rate by policymakers [3] - The overnight financing rate among banks and asset management companies has been steadily increasing due to the U.S. Treasury expanding its cash reserves while the Federal Reserve is reducing its balance sheet [3] Group 2 - The repo rate has exceeded the Federal Reserve's target range for overnight lending rates since early September and has remained elevated [4] - Market participants anticipate a brief period of calm before increased volatility as two long-term Cash Management Bills, totaling a net supply of $50 billion, are set to mature [4] - Significant cash inflows from government-sponsored enterprises are expected in the coming days, contributing to market liquidity [4]