Oct 17, 2025
70 0
SOFR–RRP Spread Widens, Signals Potential Fed Policy Shift
The Secured Overnight Financing Rate (SOFR) recently increased to 4.29%, surpassing the Federal Reserve’s overnight reverse-repo (ON RRP) rate of 4.00%, creating a 29 basis point spread—a sign of tightening funding conditions in US money markets.
- The Fed's Standing Repo Facility was used for $6.5 billion, indicating reserve frictions as general collateral repo rates climbed.
- Crypto investors see these signs as potential indicators of a policy shift similar to 2019 when the Fed's quantitative tightening (QT) faced reserve-scarcity constraints.
- Market reactions include gold reaching $4,300 per ounce and a 4.5% drop in US regional banks, signaling rising stress and liquidity issues.
- Analysts highlight that the SOFR–RRP spread suggests real liquidity scarcity due to fewer excess reserves and ongoing QT.
- The decoupling between market-based rates and the Fed’s corridor suggests potential policy recalibration.
- The Fed has shown openness to easing, with Governor Christopher Waller supporting another rate cut at the October meeting.
If the Fed halts its balance-sheet runoff, it would mimic the 2019 response to similar repo-market stress. For crypto, official liquidity backstops could support liquidity-sensitive assets despite current financial strains.
At present, the total crypto market cap is $3.6 trillion.
