Cash Scarcity SOFR - IORB

Think of it this way

It is the difference between what something costs on the street and what the official price says. As long as they match, there is plenty. When it starts costing more on the street, it is becoming scarce, even if the official price still says the same.

What is Cash Scarcity SOFR - IORB?

It is the difference between what it costs to borrow money in the repo market and what the Fed pays banks for doing nothing. If it is positive, someone is paying more than the risk-free rate to get cash.

How to read Cash Scarcity SOFR - IORB

It is measured in basis points (hundredths of a percentage point). Historically it has ranged between minus 10 and plus 5 basis points under normal conditions. Any value above plus 5 held for several days is a serious warning. Lag: none; a rate is priced in on the same day.

What Cash Scarcity SOFR - IORB means for the market

It is the best public indicator that bank reserves are becoming scarce. When this spread rises, dealers cut inventory, market liquidity worsens across all assets and the likelihood that the Fed will have to intervene increases. The episodes of September 2019 and October 2025 showed up here first.

Where the money flows

It is not money moving but the signal that moving it is costly. It compares what a dealer pays a fund for financing with what the Fed pays banks for their reserves. Example: if the Fed pays 4.00% and dealers in the market are already paying 4.20%, it means some cannot find cash at the official price and are willing to overpay to get it.

What to watch in Cash Scarcity SOFR - IORB

The practical threshold is zero, and above it there are three steps. Below zero on 75% of days: normal, the market gets cash more cheaply than at the Fed's window. Above +5 basis points, on 7% of days: there is strain. Above +15 only 1.4% of the time, and at that point it is a full-blown scarcity episode, not a passing blip: since 2018 it has only happened in four years, and they are exactly the ones people remember, the repo crisis of September 2019, the crash of March 2020 and the strains of 2025. The confirmation is to look at the Fed repo chart: if the spread rises and someone is also using the window, it is not a quarter-end accident.

The number one reserve scarcity indicator: above +5 bp there is real strain.