Soaring US Equity Funding Costs Risk Spillover Into Repo Rates
- US equity funding costs have climbed to levels typically seen only at quarter- or year-end, driven by a record pace of share issuance (including SpaceX's pending listing), elevated valuations, and the rapid growth of leveraged ETFs.
- Bloomberg reports the strain reflects intense demand for leveraged equity exposure colliding with constrained dealer balance-sheet capacity, raising the risk of dislocations spilling into repo and broader money markets.
- The warning adds to Citadel Securities' earlier alert about a 'shifting landscape' under a hawkish Warsh Fed, and comes as the Dow hit a record close above 52,000.