Part 5/11:
By late last week, the Sofr rate had been around four basis points above the upper Fed funds target, signifying a shift from normal functioning towards heightened caution among market participants. However, the Fed has yet to publish current rates for the weekend, leaving traders and analysts awaiting more concrete data on Monday.
The central bank has publicly maintained that these ripples are technical in nature, primarily reflecting the ongoing process of QT—the unwinding of the Fed’s balance sheet—rather than fundamental market dislocation. Still, the magnitude and suddenness of the recent spike suggest that market participants are increasingly risk-averse, potentially signaling underlying fragility.