Kevin Warsh, speaking at Jackson Hole on August 29, delivered a notably hawkish address that signaled willingness to resume rate hikes to combat persistent inflation. Markets moved quickly: fed funds futures repriced a September hike as the base case, with odds jumping materially intraday. This marks a significant pivot from the pause cycle and caught several asset managers off-guard.
For Armada's traditional repo desk, a rate hike reshapes the cost structure across the book. SOFR-linked repo rates will reprice higher, affecting spread economics on Treasury and agency collateral trades. Hedge fund and asset manager counterparties may reduce leverage or adjust duration exposure, softening demand on some repo tenors. Primary dealer positioning ahead of Treasury auctions could also shift, creating short-term liquidity pockets worth monitoring.