Strategist: The Fed will ultimately add liquidity under continuous pressure before the December meeting.

On October 31, the lack of a direct response to recent market pressures has led to active SOFR futures-Federal Funds Rate basis trading, while other rates in the repo market remain high. Wall Street strategists warn that as reserves decline and more Treasury bill issuances inject collateral into the market, financing pressures will persist until November. Mark Cabana, head of U.S. interest rate strategy at Bank of America, stated that the ongoing pressure will ultimately force the Fed to add liquidity before the December meeting. “The Fed's choice to remain inactive in liquidity injection operations may be because it believes the current financing pressure is temporary,” Cabana wrote in a report to clients, “but we think that is unlikely. As quantitative tightening continues, financing pressures are likely to persist and intensify.” (Jin10)