Traders have piled into basis swaps crossing secured and unsecured overnight US dollar rates in recent weeks, as anticipated and existing funding pressures hit repo markets.

Weekly volumes of federal funds-versus-secured overnight financing rate (SOFR) swaps increased almost fourfold between the last week of August and mid-October, as the Federal Reserve continued to drain reserves from the US banking system through quantitative tightening. This pushes banks to use the repo market as a way of