New York, July 2, 2026, 14:20 EDT
- U.S. equity markets open for trading Thursday, but closed Friday for Independence Day. Bond markets followed the SIFMA guideline with a 2 p.m. EDT early close.
- Fed’s overnight reverse repo took in $2.175 billion July 2. The Treasury General Account stood at $919.14 billion as of June 30.
- June payrolls increased by 57,000 and unemployment hit 4.2%, but for levered books, the smaller funding cushion could end up being more important than the headline jobs figure.
- Goldman Sachs Group NYSE:GS client data reviewed by Reuters indicates fundamental long-short hedge funds are up 17.4% so far this year.
The risk that’s not getting much talk in U.S. markets ahead of the holiday is the thin cash buffer under Treasuries. The Fed’s overnight reverse repo facility took in just $2.175 billion on Thursday. Treasury’s cash balance was $919.14 billion as of June 30. Based on the latest figures, the RRP pad is just 0.24% of Treasury cash.
This isn’t a stress print alone. It’s just a soft setup. The Treasury is about to boost its cash pile and push more bills, and bank reserves are already down on the week in the latest Fed data. Even a small move in funding rates can spill into stocks through yields and leverage.
| Gauge | Latest available reading | Market read |
|---|---|---|
| Fed ON RRP submissions | $2.175 bln, July 2 | RRP use is nearly dry |
| Treasury General Account | $919.14 bln, June 30 | Treasury’s cash pile is well up from a year earlier |
| Reserve balances with Fed | $2.951 trln week average, down $82.0 bln w/w | Bank reserves are shrinking |
| SOFR vs EFFR | 3.66% vs 3.63%, July 1 | SOFR holds 3 bps over fed funds |
Repo markets have gotten so quiet that’s now seen as a risk itself. Lou Crandall, chief economist at Wrightson ICAP, told Reuters on June 30 that he foresaw “normal turn-of-the-quarter pressures but nothing disruptive.” The quarter-end came and went without any blowout moves to catch the eye of equity trading desks. Reuters
Treasury is looking for $671 billion in privately held net borrowing for July-September and wants an end-September cash pile of $950 billion. It also thinks the TGA could top out close to $1 trillion, give or take $50 billion, in late July. Treasury said bill auction sizes should go up in July.
Stocks moved on jobs data Thursday. The BLS said June payrolls increased by 57,000, unemployment came in at 4.2% and participation slipped to 61.5%. Jobs fell in leisure and hospitality. According to Reuters, the Dow gained 0.7%, the S&P 500 was flat, and the Nasdaq dropped 0.6%. The Philadelphia chip index sank 4.1%.
Florian Ielpo, head of macro at Lombard Odier Investment Managers, called the report “the best number we could hope for,” saying the jobs market isn’t hot enough to push inflation higher. Ellen Hazen, chief market strategist at F.L.Putnam Investment Management, said the main issue is the sharp drop in the labor force. Reuters
| What markets watched | Fresh read | Less watched risk |
|---|---|---|
| Labor report | Payrolls up 57,000; participation sits at 61.5% | Fed still leaning on inflation numbers for rate direction |
| AI and chips | SOX dropped 4.1% Thursday after tumbling 6.3% Wednesday | Heavily owned tech could see selling if yields keep climbing |
| Hedge funds | Long-short shops up 17.4% YTD; Roundhill Magnificent Seven ETF BATS:MAGS slid 9% in June | If rates and funding go at once, de-grossing comes fast |
Goldman Sachs Group NYSE:GS client data reviewed by Reuters shows the funding link is hard to overlook. Fundamental long-short hedge funds posted their best quarter since Goldman began tracking, with a 17.4% return so far this year. Systematic traders took hits on swings in big U.S. stocks and on short bets against long-dated Treasuries.
Fed Chair Kevin Warsh on Wednesday said balance sheet risk is back in focus. Warsh said any decisions would be “well deliberated publicly” and that the Fed would wait until markets understood them before taking action. Reuters reported the Fed’s balance sheet stood at $6.7 trillion, off its $9 trillion high in 2022 but still above the $4.2 trillion seen before the pandemic. Reuters
Kay Haigh, global head and CIO of fixed income and liquidity solutions at Goldman Sachs Asset Management, said the Fed is still watching inflation readings since the labor market is holding steady. Any upside surprise could mean a hike comes sooner. Cash data is key, Haigh said, because markets could take a hit from inflation driving rates up and at the same time face a funding squeeze from heavier bill supply.
