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The net withdrawal of 21 billion CNY in treasury bills has pushed down the GC interest rate; liquidity remains ample, but expectations for an interest rate hike persist.

The net withdrawal of 21 billion CNY in treasury bills has pushed down the GC interest rate; liquidity remains ample, but expectations for an interest rate hike persist.

汇通财经汇通财经2026/06/16 12:44
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⑴ The US General Collateral repo rate opened lower on Tuesday, falling by 6 basis points to 3.66%, dropping below the 10-day moving average of 3.67%. This was mainly impacted by a net withdrawal of $2.1 billion from Treasury settlements—the value of new bonds issued was lower than the matured debt, which effectively injected cash into the system and reversed the upward pressure on rates seen yesterday. ⑵ On Thursday, another $3 billion in cash will be injected into the system, combined with funds from government-supported enterprises, which is expected to push overnight rates toward the middle of the 3.50%-3.75% range. Today, intraday GC rates are estimated to fluctuate between 3.66% and 3.61%, while the overnight rate is likely to be near the lower edge of the range. ⑶ The 20-year bond's premium over GC widened by 14 basis points to 33 basis points, due to hedging demand for today’s auction, while the 2-year premium remained stable. Federal Funds futures pricing indicates a 99% probability that rates will remain unchanged at the June FOMC meeting. ⑷ In terms of short-term OIS, 0x3 tenor OIS is quoted at 3.643%, about 2.3 basis points higher than the 10-day average SOFR rate of 3.62%. This implies the market is pricing only about a 7% chance of a 25 basis point rate hike in the next 90 days, which broadly aligns with the steady expectations conveyed by Federal Fund futures. ⑸ SOFR futures showed mixed performance: white contracts fell 0.5 basis points, while red, green, and blue contracts rose by 2.5 to 3 basis points. This was linked to spot oil prices dropping about 2.9%. Going forward, attention will be on the actual overnight rate response range after Thursday's settlement funds are in place and whether the auction demand for 20-year bonds can sustain the current premium level.
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