Traders Chalk Up Record Wagers on Key Fed Funds Futures Spread

Traders have been piling in record amounts into a narrow corner of the US interest-rate futures market, betting on spread movements between overnight lending rates in the event the Federal Reserve acts to dampen funding strains in money markets.

Volumes in futures spreads tied to the Secured Overnight Financing Rate and those referencing the federal funds rate rose to an all-time high Wednesday, the CME Group confirmed in a post on X. Total volumes in the one-month SOFR-fed funds basis trade surpassed 400,000 futures contracts, it said Thursday.

SOFR is a secured benchmark interest rate on overnight lending of cash ...