The Secured Overnight Financing Rate (SOFR) hit a six-year high of 5.4% on July 3rd, signaling tightening liquidity and restrictions on overnight borrowing.
This spike mirrors a similar situation from January 2nd and September 2019, when the Federal Reserve had to inject liquidity into the repo market.
David Brickell of FRNT Financial noted this as a short-term market concern, indicating pressure from excessive government debt and Treasury bond issuance. He predicts that the Federal Reserve will need to end quantitative tightening and restart liquidity injections to support the financial system.