S&P 500 Leveraged Financing Cost Surges to 110bps, Highest Since December 2024
The implied 3-month S&P 500 financing cost has risen to approximately 110 basis points, the highest level since December 2024, signaling tighter financial conditions and increased burden on leveraged equity positions.
The cost of holding leveraged equity positions in the S&P 500 is spiking. The implied 3-month financing cost has reached about 110 basis points, the highest since December 2024, according to data cited by The Kobeissi Letter.
This metric, which measures the expense for investors to maintain leveraged US equity exposure, has doubled over the past two months. The surge is attributed to rising demand for leveraged exposure via leveraged ETF inflows and elevated futures positioning, causing an unusual mid-year spike in financing costs.
Higher financing costs increase the burden on leveraged positions. If costs become too high, forced deleveraging could accelerate market volatility, as tight financial conditions weigh on equity markets.
Source: The Kobeissi Letter