SOFR Spread (proxy: FEDFUNDS - US03MY)

22 thg 5

📊 SOFR Spread (Proxy: FEDFUNDS - US03MY) – Monitoring USD Money Market Liquidity



In 2008, the spread exhibits a sharp vertical spike, signaling a severe liquidity dislocation: investors rushed into short-term U.S. Treasuries, pushing their yields down dramatically, while the FEDFUNDS rate remained relatively high.

This behavior indicates extreme systemic stress in the interbank lending market, preceding massive Federal Reserve interventions such as rate cuts, emergency liquidity operations, and the launch of quantitative easing (QE).

Description:
This indicator plots the spread between the Effective Federal Funds Rate (FEDFUNDS) and the 3-Month US Treasury Bill yield (US03MY), used here as a proxy for the SOFR spread.
It serves as a simple yet powerful tool to detect liquidity dislocations and stress signals in the US short-term funding markets.

Interpretation:

🔴 Spread > 0.20% → Possible liquidity stress: elevated repo rates, cash shortage, interbank distrust.
🟡 Spread ≈ 0% → Normal market conditions, balanced liquidity.
🟢 Spread < 0% → Excess liquidity: strong demand for T-Bills, “flight to safety”, or distortion due to expansionary monetary policy.

Ideal for:
Monitoring Fed policy impact
Anticipating market-wide liquidity squeezes
Correlation with DXY, SPX, VIX, MOVE Index, and risk sentiment

🧠 Note: As SOFR is not directly available on TradingView, FEDFUNDS is used as a reliable proxy, closely tracking the same trends in most macro conditions.

23 thg 5

Phát hành các Ghi chú

📊 SOFR Spread (Proxy: FEDFUNDS - US03MY) – Monitoring USD Money Market Liquidity



In 2008, the spread exhibits a sharp vertical spike, signaling a severe liquidity dislocation: investors rushed into short-term U.S. Treasuries, pushing their yields down dramatically, while the FEDFUNDS rate remained relatively high.

This behavior indicates extreme systemic stress in the interbank lending market, preceding massive Federal Reserve interventions such as rate cuts, emergency liquidity operations, and the launch of quantitative easing (QE).

Description:
This indicator plots the spread between the Effective Federal Funds Rate (FEDFUNDS) and the 3-Month US Treasury Bill yield (US03MY), used here as a proxy for the SOFR spread.
It serves as a simple yet powerful tool to detect liquidity dislocations and stress signals in the US short-term funding markets.

Interpretation:

🔴 Spread > 0.20% → Possible liquidity stress: elevated repo rates, cash shortage, interbank distrust.
🟡 Spread ≈ 0% → Normal market conditions, balanced liquidity.
🟢 Spread < 0% → Excess liquidity: strong demand for T-Bills, “flight to safety”, or distortion due to expansionary monetary policy.

Ideal for:
Monitoring Fed policy impact
Anticipating market-wide liquidity squeezes
Correlation with DXY, SPX, VIX, MOVE Index, and risk sentiment

🧠 Note: As SOFR is not directly available on TradingView, FEDFUNDS is used as a reliable proxy, closely tracking the same trends in most macro conditions.

23 thg 5

Phát hành các Ghi chú

📊 SOFR Spread (Proxy: FEDFUNDS - US03MY) – Monitoring USD Money Market Liquidity



In 2008, the spread exhibits a sharp vertical spike, signaling a severe liquidity dislocation: investors rushed into short-term U.S. Treasuries, pushing their yields down dramatically, while the FEDFUNDS rate remained relatively high.

This behavior indicates extreme systemic stress in the interbank lending market, preceding massive Federal Reserve interventions such as rate cuts, emergency liquidity operations, and the launch of quantitative easing (QE).

Description:
This indicator plots the spread between the Effective Federal Funds Rate (FEDFUNDS) and the 3-Month US Treasury Bill yield (US03MY), used here as a proxy for the SOFR spread.
It serves as a simple yet powerful tool to detect liquidity dislocations and stress signals in the US short-term funding markets.

Interpretation:

🔴 Spread > 0.20% → Possible liquidity stress: elevated repo rates, cash shortage, interbank distrust.
🟡 Spread ≈ 0% → Normal market conditions, balanced liquidity.
🟢 Spread < 0% → Excess liquidity: strong demand for T-Bills, “flight to safety”, or distortion due to expansionary monetary policy.

Ideal for:
Monitoring Fed policy impact
Anticipating market-wide liquidity squeezes
Correlation with DXY, SPX, VIX, MOVE Index, and risk sentiment

🧠 Note: As SOFR is not directly available on TradingView, FEDFUNDS is used as a reliable proxy, closely tracking the same trends in most macro conditions.