Large Wall Street dealers already stand to lose $5 million to $10 million if the spread between overnight and term SOFR moves against them by just 1 basis point, and their exposure grows with every new transaction.
Minutes from the FOMC's December meeting include an unusually blunt warning to investors, cautioning against underestimating the Fed's will to keep interest rates high for some time.
Facing the hottest cost pressures in 40 years, policymakers have lifted the target for the federal funds rate by 1.5% over the past two months—the steepest increase since the price-fighting era of Paul Volcker in the early 1980s.
