On the morning of September 17, 2019, an obscure short-term funding rate that almost nobody outside the New York Fed's trading desk had ever heard of suddenly became the most important number in finance. The Secured Overnight Financing Rate — SOFR, the volume-weighted-median rate at which large dealers borrow cash overnight against U.S.

Treasury collateral — jumped from a 2.43% print on September 16 to a 5.25% print on September 17, with intraday repo trades reportedly transacting at rates as high as 9-10%, against a Federal Reserve target range of 2.

00% to 2.25% set at the prior FOMC meeting. The gap is staggering in money-market terms: secured borrowing was suddenly several percentage points above the policy rate, despite Treasury collateral being the safest collateral on Earth.

Ten minutes of that on Wall Street is enough to wake the Federal Reserve Bank of New York and force the Open Market Trading Desk into emergency action: they conducted overnight repurchase operations totaling approximately $53 billion that afternoon (out of $75 billion offered) — the first such operations in over a decade — and continued daily for weeks.