Funding Markets‘ Super Tuesday

Research evidence excerpt

Funding Markets‘ Super Tuesday

Idea

July 11, 2026 12:28 AM GMT

Morgan Stanley & Co. LLCMUS Rates Strategy | North America Martin W Tobias, CFA

Strategist

Funding Markets' Super Tuesday Martin.Tobias@morganstanley.comMatthew Hornbach +1 212 761-6076

Matthew.Hornbach@morganstanley.com +1 212 761-1837

Equity funding has normalized since quarter-end, but financing Shaun Zhou

costs that span year-end remain elevated, implying balance StrategistShaun.Zhou@morganstanley.com +1 212 761-3348

sheet capacity is a persistent risk. While this leaves equity Aryaman Singh

markets sensitive to financing costs, ample reserves, Fed RMPs, Aryaman@morganstanley.com +1 212 761-1993

and sponsored repo limit spillover into UST funding. Eli P Carter

Eli.Carter@morganstanley.com +1 212 761-4703

Key Takeaways

Equity funding eased from quarter-end extremes, but remains elevated vs. prior

years, indicating financing costs are a lingering risk to levered positions.

Unlevered cash as a ratio of float adjusted S&P 500 market cap at lows last seen

in the dot-com era spotlight the presence of dealer-intermediated leverage.

Investor focus should turn to a "Super Tuesday" for bank earnings as it relates to

guidance on capital accretion, debt issuance, and equity financing capacity.

Odds of significant spillover into UST funding are low given ample reserves and

Fed RMPs. Sponsored repo is a strong mitigant against equity funding spillovers.

Tuesday also brings June CPI, where our economists expect a soft core print, at

0.22% m/m; maintain SFRM7M8 curve steepeners to fade the Fed tightening risk.

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