Group 1 - The secured overnight financing rate (SOFR) reported at 4.28% on July 21, down from 4.30% the previous day [1] - Large trades in SOFR options indicate traders are betting that the Federal Reserve will not cut interest rates as much as previously expected this year [1] - The effective federal funds rate remained unchanged at 4.33% on the same day [1]

Core Viewpoint - The Federal Reserve cannot assume that its benchmark loan rate will not drop back to zero, with a long-term probability of 9% for this scenario [1][3]. Group 1: Research Findings - The probability of the federal funds rate reaching the so-called "zero lower bound" (ZLB) within the next seven years is estimated at 9% [1]. - The current high uncertainty surrounding interest rates has increased the risk of hitting the ZLB, similar to levels observed in 2018 [1][3]. - Empirical evidence suggests that changes in interest rate expectations are the main driver of ZLB risk [3]. Group 2: Historical Context - The Federal Reserve first lowered rates to the 0%-0.25% range during the 2008 financial crisis to stimulate the economy, maintaining this level for seven years [3]. - Rates were again reduced to zero during the COVID-19 pandemic and remained there for two years [3]. - There has been skepticism among policymakers and economists regarding whether post-pandemic inflation and economic growth indicate a departure from the ZLB risk, but recent research indicates that this risk still exists [3].

Core Points - The secured overnight financing rate (SOFR) reported at 4.35% on July 3, down from 4.40% the previous day [1] - The effective federal funds rate remained unchanged at 4.33% on July 3, consistent with the previous day [1]

Core Insights - The secured overnight financing rate (SOFR) increased to 4.31% on May 27, up from 4.26% the previous day [1] - SOFR futures open interest saw significant growth, with an increase of $2.6 million/DV01 on Thursday, approximately $995,000/DV01 on Friday, and about $760,000/DV01 on Tuesday, totaling around 174,000 new contracts and bringing the total open interest close to 1.4 million, marking a new high for the current cycle [1] - The effective federal funds rate remained unchanged at 4.33% on the last trading day, consistent with the previous day [1]

Core Insights - The secured overnight financing rate (SOFR) reached 4.26% on May 21, marking the lowest level since December 2022, down from 4.27% the previous day [1] - The narrowing spread between SOFR and the Federal Reserve's overnight reverse repurchase agreement (RRP) rate to just 1 basis point indicates ample front-end funding due to U.S. Treasury payments and government-supported corporate cash inflows [1] - The repo market is experiencing a notable softening, particularly at this time of the month, as highlighted by Oxford Economics analyst John Canavan [1] Summary by Category SOFR and RRP Rates - SOFR reported at 4.26%, down from 4.27% [1] - The spread between SOFR and RRP rate narrowed to 1 basis point, the tightest since November 20, 2024 [1] Repo Market Dynamics - Overnight GC repo rates initially reported at 4.30%, 4.29%, and 4.28%, with bid-ask spreads of 4.28%-4.27% [1] - The effective federal funds rate remained unchanged at 4.33% [1]

Core Viewpoint - The sensitivity of repurchase agreement rates relative to the U.S. Treasury General Account rates indicates that financing pressures may increase once the debt ceiling is resolved [1] Group 1: Impact of Treasury Settlements - The impact of Treasury coupon settlements on the Secured Overnight Financing Rate (SOFR) is nearly double the expected increase [1] Group 2: Month-End Deleveraging - Month-end deleveraging, particularly by the Bank of Canada at the end of April, influences the rise in repurchase rates as cash borrowers must pay higher rates to obtain cash in the bilateral market [1]

Group 1 - The secured overnight financing rate (SOFR) increased to 4.41% on April 30, up from 4.36% the previous day, indicating tightening liquidity in the market [1] - The banking sector is withdrawing funds from the repurchase market to balance their balance sheets, contributing to the tightening of funds in the SOFR market, which caused the SOFR rate to exceed 4.5% during the afternoon session in New York [1] - The effective federal funds rate remained unchanged at 4.33% on the same day, consistent with the previous day's rate [1]