The Federal Home Loan Bank of New York (FHLBNY) reported on October 23 that dealers’ net holdings of short‑term U.S. Treasury bills have risen to a two‑year high. The increase comes as money‑market funds shift some cash from bill purchases into overnight and short‑term repurchase agreements (repo), supporting overnight lending despite the larger bill inventories.
FHLBNY attributes the wider bill spreads to heavy issuance and to money‑market funds shortening their portfolios amid uncertainty about Federal Reserve policy. A 2024 Federal Reserve staff study notes that moving repo cash from money funds to leveraged borrowers can expand dealer balance sheets and may lead dealers to demand higher compensation.
Overnight funding conditions
Overnight dollar funding has remained calm. The New York Fed’s Secured Overnight Financing Rate (SOFR) was observed at 3.9% for October 22, up slightly from 3.88% on October 21. FHLBNY noted that SOFR stayed at or below the Fed’s 3.9% interest rate on reserve balances during the reporting week.
The report flags potential pressure from the Canadian bank year‑end on October 30 and from cash leaving repo to pay mortgage‑backed‑security holders. It also mentions that calmer bill auctions on Thursday provided a counterweight to those risks.
Bitcoin financing trends
Coinbase Institutional’s October 23 research showed that perpetual funding for Bitcoin rose from 0.1% annualized on October 13 to 7.2% a week later, indicating rebuilding leverage. Coinbase’s financing table dated October 22 listed centralized‑finance overnight rates of 4.25%–12.5% and a Bitcoin borrowing range of 1.25%–4.75%.
Analysts note that these derivative funding rates measure the cost of maintaining leveraged positions and are not directly comparable to repo borrowing rates. A 2023 BIS paper on crypto carry highlights that interest‑rate differentials explain little of futures basis variation, emphasizing leveraged investor demand and limited arbitrage capital.
Any transmission of Treasury market pressure to Bitcoin markets would require sustained repo stress alongside worsening crypto borrowing terms and reduced market depth. Current data do not provide evidence of such a link.
