taking a break from this account... active on alts and sometimes @gauntlet_xyz
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up to late-Sept, the spread between these rates was 25bps, but with the SNB hike last month it has widened to 50bps
starting on the bills side, we know that 3m bills compete with RRPs, bank deposits, and even shorter govt paper as cash equivs
market measures of near-term stress, such as the March FRA-OIS and spread between SOFR and ED futures shown here have widened significantly, especially since March 3... 
for the March meeting at least one hike is fully priced in, with some suggesting the chance of a 50bp hike (~5% implied probability)
to start, the main role of the FHLBs as govt-sponsored banks is to provide flexible funding to member institutions against various types of mortgage-related collateral
to start, let’s look at what these contracts actually do: EDs are exchange-traded futures products that settle based on the spot 3m USD Libor rate at maturity
comparing to the same surface from a year ago, we can see this skew was not previously there
in the early 20th century, the US monetary system already exhibited a two-tier system of Treasury money and bank money
at the same time, the Fed Funds rate and 3m OIS indexed to the Fed Funds rate have also dropped, with OIS back at June levels and the Fed Funds rate trading 7 bps below IOR (which is currently at 15bps)... 
the largest buyer by far has been $BAC, making up more than half of the purchases in the most recent quarter with over $100B in securities added
In the mid-1960s, holders of US Treasuries owned physical certificates like the ones below. To receive principal and interest payments, a holder would submit the small coupons (if applicable) or the physical 'corpus' of the bond to a Fed branch, which would pay the amount owed... 
some proposed alternatives, such as Bloomberg's BSBY index, attempt to fix this gap by fitting a curve to realized deposit, commercial paper, CD, and bank bond rates to provide term structure while also avoiding the manipulation risk of a Libor survey...
while US yields have dropped somewhat also, they remain attractive compared to non-US sovereign yields on an FX-hedged basis (see JPY-hedged 10y UST in white, EUR-hedged 10y UST in red), which may be attracting foreign buyers previously spooked by the high volatility regime… 
The H.8 data splits banks into 3 categories: Large Domestic Banks, Small Domestic Banks, and Foreign Banks, giving us a general view of how assets and liabilities are distributed in the banking system... 
The reason such funds invest in illiquid assets is the high interest income, which can generate an attractive yield for investors and cover fund costs and manager fees. A manager's goal is to balance these cash flows and manage default risk to maintain stable yield and NAV... 
Thus, the October 2025 5yr TIPS didn't move when the April 2026 5yr TIPS was auctioned at a 20+ bps higher yield. Because this is normal and the market is pricing in seasonally lower inflation over the October-April period as expected... 
The issue here was always one of arbitrage capacity, as the Fed sets rates it pays on reserves (IOER in red) and repo (RRP in green) so dealers can arb the Fed Funds rate and bills/repos, respectively. The FF/IOER arb has unlimited capacity but the RRP arb was capped until now...
Since it's mainly affecting the on-the-run 10yr issue, I assume traders were happy to lend cash or other securities against that specific bond in repo (called a 'special' vs general collateral repo) and sell it short. Now, they must cover or pay the 3% fail-to-deliver penalty: 
Infinity Q was pricing swaps based on a 3rd party model, common in funds holding illiquid or OTC assets like this (or some will get a 3rd party to validate in-house models). Problem here is the CIO made some unauthorized changes, so the swap valuations cannot be approved... 
