高盛-全球利率筆記0719

18July2024|3:09PMEDT

GlobalRatesNotes:Suf?cientLiquidity,ConstrainedCapacity

n

n

n

Treasuryreporatesremainbroadlyanchored,butmoresustainedpressuresincequarter-endsuggestsashiftindynamics.

Arangeoffactorspointtopressurearisingfromconstraintsoncapacityto

facilitatethe?owofliquidityfromproviderstoendusers,ratherthaninsuf?cientlevelsofliquiditysystem-wide.

Frictionsleavefundingmarketsmorevulnerabletovolatilityonsharp

withdrawalsofliquidityfromthesystem,presentingsomerisktoourQT

baseline.AnearlierendtoFedbalancesheetrunoffwouldbeanimperfect

solution,however,asitwouldnotresolvecapacitylimitationsinanenvironmentstillreliantontheintermediationofshort-termcashlendingandlonger-termdebtsupply.

WilliamMarshall

+1(212)357-0413|

william.c.marshall@GoldmanSachs&Co.LLC

BillZu

+1(212)357-8230|bill.zu@GoldmanSachs&Co.LLC

GustavoPereira

+1(917)343-3214|

gustavo.pereira@GoldmanSachs&Co.LLC

Treasuryreporatesremainbroadlyanchored,withSOFRlessvolatileandmore

reliablywithintheFed’stargetrangecomparedtothe2018/2019experience(Exhibit1).Thereappearstohavebeenashiftinbehavior,however,bringingmorepersistentpressureoverthelastmonth.Ofparticularnote,aftershort-lived(partial)relief

followingquarter-end,Treasuryreporateshavecreptbackuptocomparativelyelevatedlevelsrelativetothepatternobservedinpriorquarters(Exhibit2).

Withquantitativetightening(QT)ongoing,anaturalquestioniswhetherrecent

pressureisasymptomofsystem-wideliquidityapproachingapointofscarcity.We

areskepticalthatistheexplanation;rather,wethinkthepressurere?ects

_

bottlenecksinthesystem’sabilitytoef?cientlychannelliquiditytowhereitisneeded.

Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegAC

certi?cationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto/research/hedge.html.

GoldmanSachsGlobalRatesNotes

Exhibit1:Whilevolatilityhasnudgedhigher,therealityremainsthatdollarfundingcostsarerelativelystableand?rmlywithintheFed’stargetrange

SOFR-IORBvsFedtargetrange

Exhibit2:AfternormalizingtoahigherlevelfollowingtheendofQ2,SOFRhastickedbackup

SOFRaroundrecentquarter-ends

bp25201510 5 0 -5-10-15-20

-25

2018

2019

FedTargetRangeSOFR-IORB

20202021202220232024

Jun-24

%

Sep-23Dec-23Mar-24

5.42

5.40

5.38

5.36

5.34

5.32

5.30

5.28

1520

-5

0510

Daysfromquarter-end

Source:Bloomberg,FederalReserve,GoldmanSachsGlobalInvestmentResearchSource:Bloomberg,FederalReserve,GoldmanSachsGlobalInvestmentResearch

Wenotedlastweekthat,whiletri-partyreporates(wheremoneyfundsprimarilylendtodealers)havemovedup,themorepronouncedmovehigherhasbeeningeneral

collateral?nancing(GCF)anddeliveryversuspayment(DVP)rates(whereendusers

suchashedgefundsborrow,predominantlyfromdealers).Theresultingwiderspread

(Exhibit3)likelyre?ectsagreatercostassociatedwithdealers’abilitytointermediate

the?owofliquidity.TheuptickinsponsoredrepoactivityrelativetoGCFandcleared

DVPvolumes(Exhibit4)doesindicatethatsomeactivityisshiftingtolessbalancesheetintensive(fromaleverageratioperspective)outlets.However,whetherdueto

incompleteprogresstowardsonboardingmarketparticipantsintosponsoredrepo,orrisk-adjustedcapitalconstraints,thereappeartobelimitstotheamountthatcan?owthroughthisavenuetoalleviatebroaderpressure.

Exhibit3:FundingpressurehasbeenmorereadilyapparentinDVPandGCFratesthanintri-partyborrowingcosts

_

AverageDVPratelessTGCRspread(estimates)

Exhibit4:Lendinginsponsoredrepoappearstohavepickedupoflate

FICCsponsoredreverserepovolumesvstotalSOFRvolume(ex-TGCR)

bpDVP-TGCRSpread

14

12

10

8

6

4

2

0

Oct-23Nov-23Dec-23Jan-24Feb-24

1mAverage

Mar-24Apr-24May-24Jun-24

$bn

1,400

1,200

1,000

800

600

400

200

Mar-23

SponsoredreverserepovolumesSOFRvolumeex-TGCR

Jul-23Nov-23Mar-24

Source:HaverAnalytics,FederalReserve,GoldmanSachsGlobalInvestmentResearchSource:DTCC,FederalReserve,GoldmanSachsGlobalInvestmentResearch

Weretheproblemsimplyoneofliquidity,wewouldexpecthighermarket-basedratesshouldcorrespondtofurtherdeclinesintheFed’sreverserepo(RRP)facility.Instead,RRPusagehasremainedfairlystickydespitemarket-basedratessettingmore

consistentlyabovetheRRPrate(Exhibit5).Moneyfundscontinuetoaccumulatecash,andtheRRPfacilityitremainsacomparativelyelastic(iflessattractive)outlet.Wethink

18July20242

GoldmanSachsGlobalRatesNotes

highertri-partyratesre?ectmoneyfundshavingabitmorepricingpoweranddealersbeingabletolendatasuf?cientlyhighratetostillearnawideenoughspreadbetweenwheretheyareborrowingandlending.

Whatthisdoesnotexplain,however,iswherethisincreaseindemandforleverageis

comingfromandwhydealersareencounteringconstraints.TheincreaseddemandforleverageistousafunctionofelevatedTreasurysupplyandtheecosysteminwhich

durationisabsorbed.ForatleastaportionofTreasuryissuance,assetmanagersabsorbthedurationviafutures,andmoneyfundslendthecashindirectlyviarepo.Levered

fundsfacilitatepartofthisbytakingtheothersideofassetmanagers’longinfuturesandbuyingTreasuries(onrepo);dealershelptointermediatetherepotransaction.

Thisisbynomeansanewphenomenon.However,afterthesepositionsbrie?y

stabilizedinQ1,therehasbeenanotableextensioninassetmanagernetlongsin

Treasuryfuturesmirroredbyamaterialbuildinleveredfundnetshorts,takingbothto

recordlevels(Exhibit6).Thishasbeenaccompaniedbyevidenceofgreaterdemandforrepofunding,visibleinrecordhighvolumeinDVPrepoandlargerdealerrepobooksize.

Exhibit5:DespitereporatessustaininglevelsabovetheRRPfacility’srate,RRPusagehasbeenrelativelysticky

RRPusagevstri-partyGeneralCollateralRate(TGCR)lessRRPRatedifferential

Exhibit6:Therecentincreaseinfundingpressurehasfollowedafurtherbuildinassetmanagerlongsandfastmoneyshortsin

Treasuryfutures

NetpositionsinTreasuryfutures(contractsscaledbycontractsize)

$bnRRPUsage

3000

2500

2000

1500

1000

500

0

_

Jan-23Apr-23Jul-23

TGCR-RRPRate(rhs)

Oct-23Jan-24Apr-24Jul-24

bp6543210-1-2-3-4-5

$bn

1000

800

600

400

200

0

-200

-400

-600

-800

-1000

2017

Dealers

20182019

AsstMgrLevFunds

20202021202220232024

Source:Bloomberg,FederalReserve,GoldmanSachsGlobalInvestmentResearchSource:HaverAnalytics,CFTC,GoldmanSachsGlobalInvestmentResearch

Regardingdealerconstraints,onepossibilityisearlier-than-usualeffortstomitigate

G-SIBscores.Whiletheseconsiderationstypicallycomeintofocusclosertoyear-end,inMayourbanksanalystshighlightedthatthisbehavioralreadyappearedtobeevident,

drivenbyseveralbanks?nishing2023atthehighendoftheirG-SIBbuckets,

considerableyear-to-dategrowthinanumberofG-SIBindicators,andnominalcalculationmeasuresthatdonottakein?ationintoaccount.Theeffectsarenot

broad-basedacrossmeasuresofdollarfundingcosts—crosscurrencybasesremain

tightbyhistoricalstandards(Exhibit7)—nordotheyappeartobehavingadverseeffectsonmeasuresofmarketfunction(Exhibit8).Evidenceofpressuresarenot,however,

strictlyisolatedtotheTreasuryrepomarket.Insteadpressureappearstobeassociatedwithareaswhereend-userdemandforleveredorsyntheticformsofriskexposure

(durationorotherwise)isatall-timehighs.

Thereisasimilarneedforintermediationinequitiesowingtoassetmanagerdemandviafutures.InTreasuries,asnotedabove,itisleveredfundswhoarepredominantly

18July20243

GoldmanSachsGlobalRatesNotes

shortfuturesversusTreasuries,withrelianceondealerbalancesheetduetotheneedforrepocapacity.Inequities,however,alargerportionofthenetshortresideswith

dealers(apositionthatissimilarlynearanall-timerecord),withpressurearisingfromtheirneedtohedgethatpositionwithunderlyingstock.Thisresultsinsomenuanceinhowthispressuremanifests—inTreasuriesasawiderspreadbetweenwheredealersfund(tri-party)andwheretheylend(DVP),versusinequitiesaswiderimpliedfundingcostsinfutures.Wewouldpositthat,ifthecash/futuresbasistradeinTreasuriessatlargelywithdealers(ratherthanwithhedgefunds),theseconstraintswouldmanifestmoresimilarly,correspondingtomorenegativenetbases/higherimpliedreporates.

Exhibit7:Comparativelytightcrosscurrencybasessuggest

fundingpressuresarebeingdrivenbyspeci?cfactorsratherthanbroaderscarcityindollarliquidity

3mEURUSDandUSDJPYOIScross-currencybases

Exhibit8:MeasuresofTreasurymarketliquiditylookfairlyhealthy,especiallyrelativetolevelsofvolatility

3m10yimpliedvolvs10ypriceimpactofsignedorder?ow

bp3mEURUSDOISbasis

0

-25

-50

-75

-100

-125

2018201920202021

3mUSDJPYOISbasis

20222023

1800.7

abp3m10yVol10yPriceimpactcoefficient(rhs)$/$bn

1600.6

1400.5

1200.4

1000.3

800.2

600.1

400

201620172018201920202021202220232024

Source:GoldmanSachs,GoldmanSachsGlobalInvestmentResearchSource:GoldmanSachs,GoldmanSachsGlobalInvestmentResearch

Intermediationbottlenecksinaworldwhereliquidityisunevenlydistributedraisestheriskofheightenedfundingmarketvolatilitywhenliquidityisrapidlywithdrawnfromthesystem.That,inturn,raisesthepossibilitythatthesedynamicscouldultimatelypromptaprematureendtoQT.AnearlierendtoFedbalancesheetrunoffwouldbean

_

imperfectsolution,however.Itwouldleavecapacitylimitationsunresolvedinanenvironmentstillreliantontheneedtointermediateshort-termcashlendingandlonger-termdebtsupply.

Amigrationofcashfromthefront-endoutthecurve,possiblyastheFedcutsrates,

couldhelp,butitisnotapparentthiswouldresultinasubstantialreductionindemandforleveragegiventhattherewouldstillbeef?cienciesforassetmanagersinusing

Treasuryfutures.RelaxationofG-SIBmitigationeffortsorchangestobankregulationscouldhelptofreeup?exibilityinsomeoftheseareas—whetherwithrespecttoG-SIBcalculations(whererecentreportssuggestedtheFedisconsideringupdating

coef?cients),orrisk-basedcapital(whichcouldopenupgreatercapacityforgrowthin

sponsoredrepo).Nearterm,however,wethinkreliefmaybeslowtomaterialize,leavingriskstiltedtowardstherecentincreaseinpressureonfundingcostspersisting.

18July20244

GoldmanSachsGlobalRatesNotes

DisclosureAppendix

RegAC

We,WilliamMarshall,BillZuandGustavoPereira,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyre?ectourpersonalviews,whichhavenotbeenin?uencedbyconsiderationsofthe?rm’sbusinessorclientrelationships.

Unlessotherwisestated,theindividualslistedonthecoverpageofthisreportareanalystsinGoldmanSachs’GlobalInvestmentResearchdivision.

Disclosures

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Seecompany-speci?cregulatorydisclosuresaboveforanyofthefollowingdisclosuresrequiredastocompaniesreferredtointhisreport:managerorco-managerinapendingtransaction;1%orotherownership;compensationforcertainservices;typesofclientrelationships;managed/co-managedpublicofferingsinpriorperiods;directorships;forequitysecurities,marketmakingand/orspecialistrole.GoldmanSachstradesormaytradeasa

principalindebtsecurities(orinrelatedderivatives)ofissuersdiscussedinthisreport.

Thefollowingareadditionalrequireddisclosures:Ownershipandmaterialcon?ictsofinterest:GoldmanSachspolicyprohibitsitsanalysts,professionalsreportingtoanalystsandmembersoftheirhouseholdsfromowningsecuritiesofanycompanyintheanalyst’sareaofcoverage.

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GoldmanSachsGlobalRatesNotes

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