Funding rates are little changed over the first week of Q3
Funding rates are little changed over the first week of Q3. SOFR has edged up to 1.990% on Thursday, versus the 1.89% rate in effect since Monday, thought it's backed down from the 2.12% over the turn of the quarter. Meanwhile, the 3-month Libor/OIS spread has narrowed to 37.7 bps, and is at the lowest since February 26's 37.5 bps, as Libor eased slightly and OIS firmed. Remember it was the firming in Libor early in the year, with 41 straight session gains up to April 9, not seen since November 2008, that spawned worried of an impending recession. As with the narrowing in the yield curve due to special factors, it was the surge in bill issuance that helped boost Libor. Analysts didn't believe Libor was signaling during Q1, and don't see the flattening in the yield curve as a warning sign either.