Funding Stress Monitor

The Funding Stress Monitor tracks four components of wholesale funding market health. These markets, where financial institutions borrow from each other on a daily and weekly basis, are the most sensitive barometer of systemic stress. Disruptions in these markets typically precede broader asset price declines by weeks or months.

Interbank spreads measure the cost of unsecured lending between banks. When banks lose confidence in each other's creditworthiness, these spreads widen sharply, as seen during the 2008 crisis when LIBOR-OIS spreads reached 364 basis points.

Repo market deviations track the secured lending market where Treasury securities serve as collateral. The September 2019 repo spike, when overnight rates briefly exceeded 10 percent, demonstrated that even the most liquid funding market can seize without warning.

Commercial paper issuance reflects corporate access to short-term funding. A decline indicates that investors are unwilling to extend short-term credit to corporations, forcing reliance on more expensive bank credit facilities.

Private credit drawdowns signal stress in the shadow banking system. Rising drawdown rates indicate that either borrowers are tapping emergency liquidity or that lenders are reducing available capacity, both of which constrain credit availability in the broader economy.