Money-Market Stress Persists Ahead of Fed’s QT Pivot (1)

Strains in money markets could persist into November as funding costs remain stubbornly high, building pressure for the Federal Reserve to bolster liquidity even before it stops shrinking its portfolio next month, according to Wall Street analysts.

The markets ended a volatile month with the Secured Overnight Financing Rate — a benchmark based on the cost of borrowing against Treasury securities — surging by 18 basis points on Friday. That was the biggest one-day move outside of a Fed interest-rate hiking cycle since March 2020.

While SOFR dropped on Monday after month-end related pressures eased, it remains above key policy ...