Why do rollover costs widen at the end of the quarter or year?

Asked 5 years ago

I trade with physical settlements, and although costly, I've profited quite well so far. However, as we near the end of the year the interest rates are spiking. Making it very expensive. Which brings me to my question: Why do the short-term interest rates (STIRs) increase towards the end of the year?

Rollover cost Widening rollover cost

Andia Rispah Igobwa

Friday, September 17, 2021

The spreads on both rollover and STIRs settlement typically get wider as we approach Quarter-End, which can cause a significant spike in daily charges.
It is because these types of loans are usually only renewed once per calendar year, so any increase will apply to both periods until they're paid off again with new interest rates higher than what was originally calculated while accounting for accrued interest.