Reporting on the September 15-16 FOMC minutes indicates committee members viewed an October rate increase as unlikely, but market participants moved to price in a hike at the December meeting. This creates a two-month window of relative rate stability followed by a potential 25bp adjustment, a scenario with distinct implications for term repo funding costs and collateral valuation.
For Armada's traditional repo desk, the October pause offers near-term pricing predictability, but December hike expectations will steepen the short end of the funding curve. Term repo offered to hedge fund and asset manager counterparties crossing the December meeting date will need to reflect adjusted SOFR forwards. Treasury and agency collateral held in the book should be stress-tested against a December move to assess mark-to-market exposure.