The global financial landscape continues to navigate waves of uncertainty. Asset classes are experiencing a sharp and synchronized downturn, while aggressive moves across the yield curve and the unwinding of crowded relative value trades like basis and swap spreads are stirring anxiety among market participants. It’s no surprise, then, that questions are surfacing about the stability of funding markets — with some drawing comparisons to the chaos of March 2020.

But let’s be clear: this is not that.

Despite the turbulence, funding markets remain resilient. The mechanics that matter most — access to cash, functional repo markets, and the robustness of sponsored repo programs — are all intact. Levels are elevated, yes, but they are broadly in line with where many expected them to be prior to the latest market turmoil. In short, we are far better positioned today than we were during the early days of the pandemic.

Still, perception can be just as potent as reality in markets. Any disruption — or even rumors of disruption — in funding rates could fuel the current volatility and lead to broader dislocations. That’s especially true with significant event risk looming. The upcoming week brings mid-month Treasury coupon settlements and the annual tax day cash flows. These flows — marked by money market fund outflows, a rise in the Treasury General Account, and a drawdown in reserves — have the potential to create temporary friction in the financial system, even if balance sheet constraints are not a limiting factor.

The current low usage of the Fed’s Reverse Repo Program adds another wrinkle. With dealer balance sheets already strained and evidence of stress showing up in today’s 3-year auction (where dealers absorbed a large portion of the supply), the risks shouldn’t be ignored. The full impact of the week’s coupon issuance remains to be seen, but signs point to further pressure.

That’s why it’s worth considering proactive measures. Positioning the Standing Repo Facility (SRF) for additional morning operations — similar to what we saw at the end of the last quarter — could be a timely move. These operations can be pre-announced and extended through the long holiday weekend, providing an important psychological backstop. Unlike quarter- or month-end interventions, these wouldn’t run into the same balance sheet constraints.

Even if these tools go unused, their availability has historically offered a stabilizing effect — easing overdraft concerns and calming broader market nerves. Given the current environment, there’s no downside to ensuring they’re in place and ready to go.

While no one’s hitting the panic button just yet, staying a step ahead could make all the difference.