Futures tied to Federal Reserve interest rates hit all-time high as traders brace for July FOMC decision

The interest rate futures market just got very, very crowded. SOFR futures open interest surged past 15.8 million contracts in recent weeks, an all-time record, as traders positioned themselves for what could be a pivotal Federal Reserve decision at the July 29 FOMC meeting.

The numbers behind the frenzy

The SR3 contract, the workhorse instrument for leveraged funds betting on short-term interest rates, hit a record open interest of 14.2 million contracts. Leveraged funds have been piling into short positions at a pace that suggests genuine conviction, not just hedging.

One specific contract tells the story particularly well. The SR3Z6, a December-dated SOFR contract, saw its open interest jump 28% over two months, surpassing 1.8 million contracts.

Total short-term interest rate futures open interest peaked at 18 million contracts across the board. The ZQ contract, which tracks 30-day Fed funds rates, exceeded 2.5 million contracts on its own.