Rates guy: *explains the treasury rates curve and the significance of the fedfunds/SOFR spread* Me: oh so you're pretty deep into the lore huh
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if the spread inverts then the io pays nothing and the floater has a supported shortfall claim which would be a claim senior to the IO for any future cashflows after re-steepening. its driven by insto demand to “remove” libor risk out of books (or at least line items)
