Data from the New York Fed shows that overnight repo volume at the underlying level of SOFR fell to $2.808 trillion on August 28, a decrease of about 20% from the high of $3.508 trillion on January 2; however, it only decreased by 2.2% year-on-year. The SOFR rate was 3.65%, with the 99th percentile at 3.73%, still not showing typical funding squeeze. As of August 25, CFTC data showed that leveraged funds reduced their short positions in 10-year Treasury futures by about 130,000 contracts, while their short positions in 5-year futures increased by about 72,000 contracts, indicating no uniform retreat across all maturities. Therefore, the decline in SOFR volume is insufficient to prove a full-scale unwinding of basis trading or a rapid withdrawal of demand for Treasury bonds.
