Signs of tightening in the repo market emerge as investors flock to Federal Reserve interest rate futures

Jinse Finance reported that as the short-term financing market faces tightening risks at the end of the quarter, investors are flocking to futures linked to the Federal Reserve's benchmark overnight rate at a record pace. Data shows that the trading volume of the September contract for federal funds futures, used to bet on the movement of the Fed's benchmark overnight rate, has approached 500,000 contracts, surpassing the previous record for a generic contract set on April 3—when Trump announced large-scale tariff policies, triggering market turmoil. Some market participants are concerned that the continuous decline in reserves may lead to a surge in financing pressures at the end of the month and quarter, as dealers cut back on repo operations and strengthen their balance sheets to meet regulatory requirements, thereby driving up financing costs. As traders anticipate that the effective rate may rise to 4.10% before the end of the month, selling intensified again during the early U.S. trading session.